I asked estate planning attorney John Goralka, of the Goralka Law Firm in Sacramento, to share his thoughts on working with clients to avoid disputes over their estate plans.
John has been a lawyer since 1988. The State Bar of California has certified him as a specialist in both Taxation Law and Estate Planning, Trust & Probate Law, a dual certification held by relatively few California attorneys.
Tell me about your personal and professional background.
Family is important to me. I grew up on a ranch in the Livermore Valley in Alameda County with five brothers and three sisters. I feel truly blessed to have grown up in a large family. We remain close and enjoy spending major holidays and other gatherings throughout the year together. Each of my siblings has an advanced degree, which is a testament to my parents. Our family get-togethers are never quiet or boring.
I founded the Goralka Law Firm in 1996. The firm helps successful families, business owners and real estate owners achieve their enlightened dreams by minimizing taxes, better protecting assets, resolving transitions, and even cleaning up messes from time to time.
What do you enjoy about working with clients on estate plans?
I am particularly proud that we have made a difference in the lives of our clients and their families. We have many long-term clients of twenty years or so. For many families, we are now representing the second or third generation. We consider our clients to be an extended family.
When you meet with clients, what do they tell you they worry about in terms of potential intra-family conflict over their plans?
Clients often worry about creditors, predators, in-laws, and outlaws. They worry about legacies being wasted, or even having a negative effect on certain family members if received at an inappropriate age or time.
Clients also worry about conflicts between their children or heirs after they are gone. They are particularly concerned about how the spouses of their children or heirs may affect their later behavior. They struggle with the concept of dividing an estate equally between children or heirs, or perhaps fairly, based upon other factors, such as assistance received in later years, or the differences in the life circumstances or needs of their children or heirs.
What strategies do you use with clients to help them avoid future conflict?
Nobody wants conflict so I try to achieve client goals with conflict-avoidance in mind. I use a variety of approaches depending on the situation.Communication is key.I encourage next-generation involvement (when appropriate) in the planning process. This may prevent future disputes. For example, one family’s goal is to ensure that certain family property including a home and vineyards remains in the family for future generations. We met with the children to discuss the goals and establish a process to permit the children to work together. We continue to meet each year to discuss the family’s goals.
Private discussion of client goals. While I may involve or permit family members to attend meetings on occasion, I always meet with clients privately throughout the process to ensure that I understand and address their specific goals, and document those goals as needed to provide future guidance.
Consider the next generation’s attitudes about money and family relationships. For example, are the heirs ready for the money? Do they get along? Do the clients have any goals for the next generation? Who do the clients want their children to be when they are no longer there to guide them?
Consider family relationships when selecting successor trustees. For many families, selecting a son or daughter to act as a successor trustee is the best choice. However, for other families, having one sibling oversee the trust administration and the shares to his or her siblings is a recipe for future family discord. It is important to consider the family dynamics and the ability of the children to work together. When future generations meet for Christmas or other family gatherings, the focus should be on the relationships, not on trust administration or other issues.
Independent tie-breakers for co-trustees. If co-trustees are named in a trust instrument, we recommend including a majority-rules provision, and naming someone to serve as a tie-breaker, so as to create an informal dispute resolution process to resolve any future dispute without going to court.
Address allocation of personal property and effects. It is important to address division or distribution of personal property and effects. I once had a trust dispute arise in a large estate that was inspired and ultimately resolved by distribution of a wooden pagoda that had great sentimental value to a beneficiary. That fact was not immediately identified and was the key to resolving the dispute. The point is that pictures and other items of personal property can have value to the beneficiary far in excess of economic value.
Lifetime gifts, advances and loans. I address in the plan the effect of lifetime gifts, advances, and loans. For example, some clients may wish to reduce gifts at death by the unpaid loans or advances.
Update beneficiary designation forms.Death beneficiary designations are simple and easy to complete, but are often overlooked. If you change the beneficiaries in your trust but fail to make corresponding changes to beneficiary designations on specific accounts, your estate may not pass the way you want.
Periodically monitor and update the plan if necessary. I meet with high net worth clients annually to monitor and update their plans. I recommend review meetings for all other clients at least every three years. If new family issues develop, we can make adjustments to avoid future conflicts.
Do you recall any creative approach that you took to head off a conflict?
A client, with an interest in a large estate involving many real properties used for ranching, vineyards, and commercial buildings, began to have conflicts with his sister, the other heir. After the client died, the beneficiaries could not agree on how to divide up the properties. One interested party objected to all the proposals and recommendations from her brother. Ultimately, instead of litigation, we structured a cooperative solution that allowed her to select which properties she wanted. Everyone ended up with assets of roughly equal value, and we avoided a divisive and expensive court battle.
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