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Jewish World Review Nov. 29, 2004 /16 Kislev, 5765

Jan L. Warner & Jan Collins

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Consumer Reports

Do we tell the kids they're not in our plan? | Q: My wife and I are in our mid-60s and just completed our planning documents, which provide for our care and comfort during our lifetimes. At the time when the second of us dies, whatever may be left will be divided equally among our four children. We know that our children love us, but we have decided that we don't want them to be in charge of our funds should either or both of us become unable to handle our affairs.

First, we don't want to choose among them; second, we don't want to take the chance of appointing all of them and there being disputes; third, none lives very close to us; and fourth, we believe that the spouses of two of our kids could stand in the way of us getting the care we want. So, with the help of our lawyer, we developed a plan that places an independent third person in the driver's seat with very specific instructions, both during our lives and after we die. We appointed this independent person as first alternate agent in our powers of attorney and as first alternate personal representative of our estates. In short, our children will have nothing do to with the administration of our funds either during our lives or after we die, but they will be called on to make health decisions for us if we are unable to do so.

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Since then, my wife has been tormented about whether to tell our children how we have chosen to handle things. I don't think we should tell them anything; she feels we should. Here are our questions: Are we unusual in not wanting our kids in charge? Should we tell them?

A: Based on the responses and inquiries we receive from our readers, your situation is not unusual. We hear from more and more readers who do not want their children in charge of their finances. The three most common reasons are: (1) Where there is a second marriage, the children are perceived to be jealous of the relationship, and one spouse fears that the children will cut out the other spouse; (2) Situations where folks like you feel that the spouses of one or more children rule the roost in their homes and would interfere with appropriate care and asset distribution at death; and (3) Where the children may have debt, substance abuse or other such problems that could adversely affect their judgment — and your welfare.

When you place a person or entity in charge of your assets and health care, you are giving them much more than a title. You are appointing them as fiduciaries, vesting them with the responsibility of acting in your best interests. Unfortunately, the duties of fiduciaries are often poorly explained and/or misunderstood, which, in turn, leads to bad results for folks like you and your wife. Moreover, with the title of "fiduciary" comes the risk of potential liability, not only to you and your wife but also to your other children.

If you appoint an "independent third person" as your fiduciary, we believe your documents should include some protection and stop losses — like a certified public accountant auditing your accounts every month. If you require a bond, the cost will diminish your estate, and the wording of many bonds may make collection difficult if there is a loss.

On the other hand, while using a bank trust department may bring the perception of safety, this may not be the case because of increased emphasis on profitability through more sources of fee revenue. Some banks levy charges such as ATM fees, while other charges are hidden in investment portfolios, trust and estate administration, etc. Some examples of bank self-dealing about which our readers complain include: (1) the investment of fiduciary funds in a bank's own stock, obligations and proprietary mutual funds that generate undisclosed fees; (2) the use of a bank's own or affiliated brokerage service, which also generates fees.

Banks and their trust departments should be sensitive to these actual and potential conflicts of interest, and should have written policies and procedures to deal with these situations. Some state legislatures have enacted laws that permit certain types of self-dealing only where there are clear disclosures to the account holders. And, documents should contain conflict-of-interest provisions.

It's a toss-up whether you tell your children you have decided to spare them the difficulties of handling your funds should you become incapacitated. If you believe your children will be angry or hurt, the question is whether it's better to face this issue now or carry the fear with you until you die. And if they are angry or hurt now, a good question to ask yourself is, "Why should it bother them?" It is, after all, your money and your decision! If you decide to tell them, suggest they go to and access our information on fiduciary duties. This might convince them that they don't really have the time to do what you have chosen to farm out.

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JAN L. WARNER received his A.B. and J.D. degrees from the University of South Carolina and earned a Master of Legal Letters (L.L.M.) in Taxation from the Emory University School of Law in Atlanta, Georgia. He is a frequent lecturer at legal education and public information programs throughout the United States. His articles have been published in national and state legal publications. Jan Collins began co-authoring Flying SoloŽ in 1989. She has more than 27 years of experience as a journalist, writer, and editor. To comment or ask a question, please click here.


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What Makes Up a Caregiving Team?
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© 2004, Jan Warner