THE BEST intentions can have unintended consequences, and that's often the case in estate planning.
Parents intending to treat children equally end up treating them unfairly. Or, never wanting to bring up the topic of death, parents die never explaining why they divvied up property the way they did, leaving children confused or hurt for years.
Sometimes, simple things can cause problems, such as putting a will in a safe-deposit box under one name. No one else has ready access to it. It can be opened, but not without hassle and the cost of a court official and, likely, a lawyer going to the bank, said Jeff Gonya, a Baltimore lawyer who has done this task.
Ask lawyers about common estate planning mistakes people make, and they respond, "How much time do you have?"
Though missteps may be plenty, solutions can be more numerous. No two families are alike, and what works for one won't work for another.
Here are some issues that can come up, and suggestions for handling them:
Powers of attorney: People often resist setting up financial and health care powers of attorney, said Julia O'Brien, a lawyer in Chevy Chase.
They worry about giving up control, but that's exactly what can happen if they don't have these documents, she said.
Powers of attorney allow people to decide whom they want handling their finances or health care decisions if they become incapacitated. Without the documents, the court ends up naming a guardian to manage finances, and may also choose the person to handle medical matters, O'Brien said.
Minor heirs: Parents often name a young child as the beneficiary of, say, a life insurance policy or other assets without ensuring that the child doesn't come into the money too young, said Allan J. Gibber, a Baltimore lawyer.
For example, a youngster can inherit a tidy sum of money, and the court would appoint a guardian. But once the child turns 18, she's free to spend it any way she likes, Gibber said.
If parents aren't comfortable with that, they need to set up a trust or custodial account, he said.
With a custodial account, a child in Maryland would be eligible to receive the money at 21, which might work for smaller sums that could be used to finance college, lawyers said. But for large amounts of money, parents are advised to use their wills to set up a trust for the child, where they can decide when the child gets the money, half at age 25 and the rest at 35, for example.
Names on accounts: A parent with two or more children often puts one child's name on the parent's bank account, usually because that child lives nearby and can write checks from the account if the parent can't, Gibber said. The parent makes a leap of faith that the child named on the account knows that the money is to be shared equally among all siblings at the parent's death, Gibber said.
When the parent dies, the money belongs to the child named on the account. Often the child ends up keeping the money, igniting a feud with siblings.
A better move is to put all children's names on the account, Gibber said. Or, put no child's name on the account and use a power of attorney to designate one child to make financial decisions for an incapacitated parent, he said.
Beneficiary designations: Another problem is people name their estates as the beneficiary of tax-deferred 401(k)s or other retirement accounts. By doing that, they often accelerate the income taxes due on the accounts, lawyers said. Generally, it's better to name the intended recipient, either a person or charity, as the beneficiary, Gibber said.
Burial directions: Don't put burial instructions within the will, which might not be opened for many days after your death, Gibber said.By the time your family reads in the will of your objection to cremation, for instance, your ashes could be floating in the Inner Harbor.
It's better to tell family members or keep a letter of instruction of burial wishes where it can be easily found at your death, lawyers said.
Personal property: Often it's not the million-dollar yacht that family members fight over but the small items that have little financial worth, but great sentimental value, lawyers said.
"I've seen horrific fights over personal effects," said Les Kotzer, co-author of The Family Fight, Planning to Avoid It. "It can happen to any family."
If there's some specific item that you want an heir to have, such as your collection of thimbles, that could be included in the will. But for other items, people should set aside a wish list detailing how they want their belongings distributed. Such a list can be easily updated, Kotzer said.
Equal vs. fair: In more cases than not, dividing property equally among children is the best solution to avoiding family battles, some lawyer say.
But "equality is not always fairness," Kotzer warns. For example, equal shares might be resented by the child who provided an ailing parent around-the-clock care for years. Or, one child might object to an even split with a sibling who had financial handouts from their parents over the years.
Deciding how to divide assets in these situations is tough, and parents need to give careful consideration to how their children will respond if they want to keep family harmony, Kotzer said.
Communication: Many problems can be avoided if families talked about estate plans.
Gonya recommends that parents hold a family meeting to tell adult children about their plans and the reasoning. "They don't have to go into dollar amounts," he said. "I do think it's important that children understand what's going to happen in general terms."
The discussion could uncover potential problems that parents can fix before it's too late.
To suggest a topic, contact Eileen Ambrose at 410-332- 6984 or by e-mail at eileen. email@example.com.