Monitoring an estate plan involves more than periodically reviewing documents.

  • If you looked at your personal balance sheet, could you quantify the residue of your estate?
  • Do you know your estimated estate-tax liability?
  • Do you know if your specific bequests can be fully funded after the estate taxes are paid?

Integrating a family’s estate diagram with personal financial statements addresses these questions and quantifies the answers. An estate diagram should not be shelved until needed; instead, it should be a tool to help you determine if your goals are realistic.

We worked with a family patriarch, Jack, with a complex estate. While Jack was comfortable with the language in his estate documents, he wanted to be able to evaluate the distribution of his estate to ensure his legacy would be sustained. Jack explained his preference for visuals (graphs and flow charts) rather than narratives. To accommodate him, we customized an estate diagram to quantify and display the following:

  • Specifically bequeathed assets, their current value and references to the estate document (including article number) governing the disposition of these assets.
  • Estimates of amounts going to specific individuals and whether the amounts were in line with Jack’s desires.
  • Special provisions attached to bequests.
  • Current (estimated) estate-tax liability.
  • Value of the estate’s liquid assets and the estate’s ability to pay its estimated tax liability.
  • Designated trustees of each trust created upon Jack’s passing.
  • Current (estimated) residue of Jack’s estate that will be committed to his foundation.

Each quarter we update the diagram to reflect current values and link it to Jack’s personal financial statement. It gives him a visual snapshot of the disposition of his estate. We then meet to discuss whether the current estate documents are in line with his desired results and to review the following questions:

  • Have there been any changes to beneficiaries that must be addressed?
  • Has anything occurred that could lead to a beneficiary being incapable of handling the inheritance?
  • Has anything changed that could result in eliminating the need for a trust?
  • Is the amount going to Jack’s foundation sufficient to meet its goals?
  • Do any pending projects require significant assets? If so, how will they affect the estate? Can Jack “afford” the project without inadvertently reducing the amount available for specific bequests? What should happen to that asset upon his death?
  • Is the estate tax a tolerable amount or are there gifting strategies we should add to control the estate tax?
  • Who is designated as trustee(s) of the various trusts that will be created upon our Jack’s death? Are they capable of carrying out their duties?

Jack has specific intentions with respect to his estate. He wants to leave his children financially secure, without taking away any incentive for them to become well educated and able to provide for themselves. He also wants at least 50% of his net estate to be distributed to his foundation.

By looking at Jack’s estate diagram, we see that only 37% of his net estate is currently projected to be distributed to his foundation. Armed with that information, our client can determine if the amount is acceptable or if it warrants changes to his estate documents. We can show him the amount he would need to adjust specific bequests to achieve his goal of leaving 50% to the foundation. If the estate-tax rate changes, we can show him the estimated effect of the residue flowing to his foundation.

In this example, Jack has designated that a specific nonfamily member receive a specific private equity investment. If the value of the investment decreases, he may wish to make other provisions. If the value significantly increases, he may wish to change his estate documents to provide that only part of the investment will go to this individual.

At any time, if Jack wishes to review the specific wording for any bequest, we can take him directly to the governing document, article and paragraph number. If changes are needed, we can then easily direct his attorney to the specific article to be changed.

In many cases, our estate review does not stop with preparation of the estate diagram. In this case, Jack wishes to ensure his children have been treated equally in terms of lifetime gifts received and amounts to be received upon his death. Vogel maintains detailed records of the loans to the children, including interest accrued at the rates prescribed by the Internal Revenue Code. Vogel maintains schedules of the direct gifts to each child; some of the gifts will be applied against the children’s inheritances while others will not. If the amount of pre-death assistance provided to one child is getting close to the child’s specific-bequest amount, our client must make a decision: increase the bequest, reduce current assistance provided to that child, or make no changes (which may result in hardship for the child after our client’s death).

This process also leaves documented evidence of our client’s intentions. No one wants to leave an estate open to dispute by beneficiaries. Beneficiaries will not see this diagram unless our client chooses to share it. Jack keeps it private, allowing him the ability to make changes without repercussions. If a beneficiary were to dispute the estate distribution, we could produce evidence that our client was fully aware of the estimated values and chose to not make changes.

Here, we have woven Jack’s personal financial statements into a quantified estate diagram and maintained detailed records of his lifetime gifting. Each of these items has a direct effect on the others and provides our client with a broader estate review.

To receive a copy of the estate diagramed referenced above, please contact us.