MoneyTrainers Podcast Notes
In this episode, I talk about why estate planning needs to cover much more than just writing a will.
This links closely with The Last Ten Years workshops, which look at the decisions we may need to make as we get older, lose capacity, need care, or rely on other people to manage our affairs.
The aim is simple. We cannot avoid death, but we can make things easier for the people left dealing with our money, property and decisions.
A common family problem
Consider this situation.
Dad has died and leaves his whole estate to Mum.
Their three children are all executors of Dad’s estate. Their job is to deal with Dad’s affairs and make sure the estate passes to Mum.
Mum is still alive, but she has dementia and now lives in a care home.
One of the three children also has a Lasting Power of Attorney for Mum.
Another child is still living in the family home.
This creates a difficult mix of:
- legal duties
- care costs
- property
- family expectations
- emotion
Dad’s estate still belongs to Mum
This is an important point.
The children may be executors, but Dad’s estate is not their inheritance.
Mum is the sole beneficiary.
The executors must deal with Dad’s estate properly and make sure the assets due to Mum pass to her.
At the same time, the child acting as Mum’s attorney has a separate duty.
They must act in Mum’s best interests.
When the family home becomes a problem
Mum still has a life to fund.
She may have:
- care home fees
- personal spending
- property costs
- tax
- other ongoing bills
If her available cash starts to run short, assets may need to be sold.
That could include the family home.
The problem is that another child is living there.
They may have lived there for years.
They may regard it as their home.
They may have nowhere else to go.
The rest of the family may feel awful about asking them to leave.
But the attorney cannot simply put the interests of a brother or sister ahead of Mum’s needs.
It is still Mum’s property.
It is still Mum’s money.
Mum comes first.
One person can have two different jobs
The child acting as Mum’s attorney may also be one of Dad’s executors.
That means they need to understand which role they are carrying out.
As an executor, they are dealing with Dad’s estate and making sure it passes to Mum.
As an attorney, they are managing Mum’s affairs and acting in her best interests.
Those are different duties.
Neither role gives them the right to make decisions based simply on what feels fairest to the wider family.
Where better planning could help
This is where planning in advance can make a huge difference.
Suppose Mum had said, while she still had full capacity:
“I am happy for my son or daughter to live in the house while I am alive.”
That sounds simple, but it raises more questions.
Who pays the household bills?
Who pays for repairs?
Who pays for insurance?
What happens if Mum needs the money for care?
Does the child have to leave if the house needs to be sold?
How much notice should they get?
Should there be a time limit?
What happens if the children disagree?
If nobody has discussed these things, the family has to work them out after Mum has lost the ability to explain what she wanted.
That is when things can become very difficult.
Why I talk about The Rehearsal
This is one of the main ideas behind The Last Ten Years.
Estate planning should not only ask:
“What happens when I die?”
We should also ask:
- What happens if I lose capacity?
- What happens if I go into care?
- What happens if one of my children lives in my house?
- What happens if I need the money tied up in that property?
- What happens if my children disagree?
- What would I want my attorney to do?
- What should the person living in the house pay?
You cannot plan for every possible event.
But you can give people some direction.
That direction may stop a difficult situation becoming a family dispute.
The main point
While Mum is alive, the money still belongs to Mum.
Dad’s estate must be dealt with for Mum’s benefit.
Mum’s attorney must act for Mum, not for the wider family.
Sometimes that means making decisions that other family members will not like.
That is exactly why these conversations need to happen while people still have the ability to have them.
Because doing nothing is still a decision.
It may simply mean your children are left making very hard decisions without you.
Find out more
You can find out more at:
MoneyTrainers.co.uk
and
TheLastTenYears.co.uk
The Last Ten Years website covers these issues in more detail, along with workshops, practical information and new material.
You can also join the email list for updates. Emails will be occasional and your details will not be shared.
If you want to talk through any of these issues, that is also part of what The Last Ten Years is about.
Sometimes the first useful thing we can do is simply talk about what might happen before it actually does.
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