But the key isn't just to have a plan. It's to have one that works. John Fraker, an attorney with Ainer & Fraker, an estate-planning firm in Saratoga, Calif., says he had a case in which a man with 23 properties went to a so-called "trust mill" on the advice of his CPA to set up a rudimentary trust. The trust was supposed to leave four properties to his second wife. The rest were to be evenly divided among his children and sister. But a trust is an empty vessel until it's funded, and the properties were never titled in such a way that would land them in the trust. The result was that all 23 properties-which the man owned in joint tenancy with his second wife-went to his second wife because she was the surviving tenant. Fraker says when the wife met with her attorney and asked "How much do I need to give to the kids and sister?" her lawyer replied, "Nothing. This is 100% yours."
"Obviously, the kids and sister were furious," Fraker says. "They hired us to litigate against the joint tenancy transfer, and to get the assets back into the trust."
Fraker says the kids got a lucky break. In happier times, the family was all together one day and someone videotaped the gathering and caught the father on tape making an offhanded comment about how he wanted all of his assets to be divided among his wife, children and sister. The admission was compelling because it was made casually and did not appear forced or coerced.
In the end, the wife acknowledged she knew her husband's real intent: He wanted his estate to be split evenly among his family members. As a result, 18 of the 23 properties were placed in the trust. But by that point, there was so much rage between the children and their stepmother, the lawyers were negotiating anger rather than assets.
"That case went on for three to three-and-a-half years, and we won the judgment in the first year. The rest of the time was just screaming," Fraker says.
A good estate plan must address everything-particularly assets that are notoriously controversial once the patriarch has passed on, such as a family business. It's not uncommon for the husband to leave the business to his second wife so that she can live off of the profits while she's still alive. He may then leave the day-to-day oversight to his children. But because the wife has no familial ties to the business, she may want to sell it. At the very least, she may not want to plow any more money into it.
"It's a recipe for disaster," says O'Neill at Mechanics Bank. "The child running the business is going to want to keep plowing the profits back into the business while the surviving spouse is going to want a certain income stream to live on."
O'Neill says a husband, in this case, should simply purchase a life insurance policy and have his wife live off the income of that. He could then leave the business to the child who is operating it.
But stepparents haven't cornered the market on greed. Sometimes it's the stepchildren, who may not have thought much of their stepparent, that can be the problem. O'Neill's firm is sometimes brought in as a corporate trustee after a family member was overseeing the trust, unsuccessfully. Sometimes the problem is that the stepparent was using the trust's funds to maintain an opulent lifestyle. Other times, it's because the children were made trustees and, fearing the assets would dwindle away to nothing, put their stepparent on a tight leash.
O'Neill recalls one instance in which the son was made trustee, and he told the stepmother she had to move out of the home in which she lived with his father and into a smaller house because, he asserted, she didn't need so much space. When she refused, he cut her allowance so she couldn't afford the upkeep on the property. At 81, she was going to have to start doing her own gardening. She was also going to be forced to sell some of her own assets in order to cover her living expenses-costs that were supposed to have been covered by income from the trust.
"We're not talking about a gold digger here. This woman was married to his father for 25 to 30 years," O'Neill says.