Estate Planning Lawyer in Palatine IL
“Shirtsleeves to Shirtsleeves” is a phrase I heard at a recent estate planning attorney conference. It means that often wealth is created by the 1st Generation, perhaps an immigrant who comes to the United States from the Philippines with just the “shirt on their back.” They work hard to create their wealth, sacrificing free time, family time and vacation time for years on end. The 2nd Generation sees the sacrifice and hard work of their parents first hand. They work hard themselves, but not necessarily in the same way as the 1st Generation because they grew up relatively “comfortable.” The 3rd Generation never did see the work Grandma and Grandpa put in to create the wealth, so they generally enjoy freely spending the assets, and perhaps are not too ambitious in their own respective careers. Then the 4th Generation takes a look at the Estate and what the 1st Generation was able to accomplish… and wonders…. What happened to all of that wealth?
The reality is:
- 50% of the failure of family wealth planning is due to Lack of Communication and Trust within the family decision making, education and governance
- 30% of the failure is due to No Clarity of Family Purpose and individual place and purpose
- 15% of failure is due to Unprepared Heirs
- 5% of failure is due to failures of financial planning, taxes and investments
They say that when a person receives an inheritance, on average, the funds are gone within 18 months of receipt! That is insane. It makes me wonder how many years did the decedent spend at their place of work to earn the funds that this person received? 10 years, 20 years, perhaps 40 years? And yet, the recipient was happily spending it in just a matter of a year and a half.
Most clients want to keep their Wills and Trusts “simple.” “When I die, everything goes to my children, equal shares, and outright, with no strings attached.” Sure, it sounds “simple.” However, the complexity lies in the many unforeseeable circumstances that can happen in the children’s lives.
- What if Johnny receives his $500K inheritance, uses it to pay the balance on his mortgage, on a house that is titled with his wife? Then a year later, his wife wants a divorce? What then?
- What if Susie receives her $300K inheritance, and the next day she is involved in a car accident, that results in a loss of life? Can the plaintiff in a wrongful death lawsuit access her inheritance?
- What if Billy is in the middle of a bankruptcy case, then all of a sudden Mom dies, and leaves him with $200K? Will his creditors get to the funds?
Often clients tell me…. that would never happen to my family! Well, statistics show otherwise. Think that your surviving spouse will never remarry? According to the National Center for Biotechnical Information, by 25 months after the death of a spouse, 61% of MEN and 19% of WOMEN, have remarried or are involved in a new romance.
So whether you are worried about your family members being “spoiled” with their inheritances, or whether your ex son-in-law is going to get your hard-earned assets, or whether your husband will find a new wife shortly after your death, it is very important to plan. If you don’t have a solid estate plan in place, the default is almost always a disaster.