Andy Reynolds recently interviewed Mike Reynolds, Member at Kinkead & Stilz, on Legacy Planning. Full interview below.
How have family dynamics changed the way you approach estate planning compared to 10 or 20 years ago?
- Today we see a lot more blended families than we saw in the past. That means having conversations about stepchildren and more frequent use of postnuptial agreements to ensure the agreed upon plan is carried out even after the first spouse’s death.
What conversations do families tend to avoid, and what are the consequences of waiting too long to have them?
- Clients often avoid discussing their finances and general estate plan with their children at all. Some clients do not want their children to know the extent of their finances and the consequences of this can be felt during life and after death. Without adequate disclosure, the children, who are often named as Executor of the second spouse to die’s estate or as the surviving spouse’s power of attorney, may be unprepared to administer the Estate at death or effectively help the surviving spouse during life because they are unfamiliar with the parent’s assets. Clients also struggle to discuss their children or grandchildren who may need additional help, whether it is a spendthrift situation or toxic marriage. By not having these types of difficult conversations, we may not be able to adequately plan to protect the clients assets or provide the appropriate safeguards to navigate these difficulties after the parent has passed.
Receiving a significant inheritance can be overwhelming. From an estate attorney’s perspective, what are the first things someone should, and shouldn’t, do?
- Beneficiaries receiving a large inheritance should contact their own planning team. This includes an attorney to explain how this inheritance affects their own estate planning, including planning around the estate tax and to update their documents accordingly, an accountant to explain how this inheritance affects their tax situation and an investment advisor and/or wealth manager to assist them and ensure they are properly investing this inheritance. They should NOT blow it on booze and fast cars! haha
We’ve partnered with Corporate Trustees a lot recently. What situations make you recommend a professional trustee instead of naming a family member?
- If the client has a particularly large estate and does not have a family member with enough knowledge and expertise to properly manage the funds, a corporate trustee may be helpful. Or, if a client has one child they would like to name as trustee but one child that would not be suited to act as trustee and wants to avoid any intra-family conflict if the children are treated un-equally, a corporate trustee may be best to act for both trusts so everything is equal in the eyes of the children. Additionally, if a corporate trustee already has a working knowledge of the assets of the trust, they may be best suited to act as Trustee, for instance if the assets are all brokerage accounts held by a firm, that firm will already have a knowledge base of the assets and could seamlessly step into that role.
How often should people review and update their estate plan, and what life events should trigger a review?
- We generally recommend clients review their estate plan every five years. However, the death or incapacity of your named agents, birth or adoption of a child, starting or selling a business, retirement, a change in citizenship, receiving a large inheritance, or if you or your named agents move out of state, are some life events that may trigger a review.
What role does communication play in a successful wealth transfer, and how much should parents share with their children before assets are transferred? What are some successful outcomes of a multigenerational approach?
- When parents adequately disclose their decisions and financial situation, this helps ease the transition of assets after death but also during life as parents age and need additional assistance. For example, say a client decides to devise their assets to their children unequally, one child is in the Peace Corps, and one runs a successful business, and they have decided to allocate more funds to the child in the Peace Corps. If the parents communicate this decision with their children before death, this communication can soothe the child who is receiving less and may reduce the risk that the parent’s estate is challenged in litigation because that child knows that this unequal treatment was ultimately the parent’s decision and there was no undue influence. Open communication often reduces the risk of estate litigation in the future.
Can you share an example of where planning ahead had positive impacts on a multigenerational family plan?
- Planning ahead and setting up lifetime trusts for your children, and even for further generations, can have a huge impact if a child gets divorced. A common estate plan in the past would distribute the principal of the trust outright to the children at certain ages, often a third at 30, half at 35, and then the remainder at 40. These are all common ages to get divorced, and once the trust funds are distributed to the beneficiaries, those funds become part of the marital estate and are divided up in a divorce. However, by setting up lifetime trusts for the children instead of forcing a distribution outright, there is a much better argument that those undistributed assets held in the trust are non-marital property. This type of planning utilizing lifetime trusts allows clients to protect their children from a future divorce at any age and gives clients peace of mind that their assets are better protected from their children’s spouse. This type of planning also gives clients peace of mind that their grandchildren will inherit their assets because the client can dictate today what happens to those assets at their children’s deaths.
If every family could do just one thing this year to improve their estate plan, what would they be?
- For families with a large estate, make annual gifts! For 2026, everyone can gift up to $19,000, and each married couple can gift up to $38,000 if they gift split, to any person on earth all tax free using their gift tax annual exclusion. If implemented early on, annual gifting can significantly reduce a client’s taxable estate and allow them to transfer wealth to further generations while getting to see and actually enjoy the benefit of those gifts rather than waiting to transfer all of their wealth at death when they cannot be there to enjoy it. A close second, for clients that are charitably inclined, often times the best way to make these gifts are through their retirement accounts. So if clients are considering leaving charitable gifts, they should review their estate plans to see if they should instead make these gifts through their retirement accounts.