A recent article in The New York Times, “When Friends Are Your Primary Concern in Making a Will,” by Sara Murphy, focused on individuals who, for a variety of reasons, choose to make their friends beneficiaries of their will instead of members of their family. In some situations, the individual may be single with no children, or they may be estranged from their family. In others, they may feel as if their family members are already provided for through other means (for example, individual retirement accounts, gifts during life).
For those without any family, the article points out that it’s important to plan for long-term care or the possibility that the individual will become incapacitated. This may involve finding a trusted friend to act as executor or as the health care agents. This could put a burden on the appointed friend, so it’s important to discuss this first with the friend. The chosen individual should be trustworthy and have the time and energy to take on this position.
Common Issue?
The article prompted me to think about whether this is an issue that estate-planning practitioners deal with often. So I asked a few of our editorial advisory board members about their experiences. It’s not unusual for clients to want to leave their assets to a friend rather than family, says James Dougherty, partner at Dungey Dougherty PLLC in Greenwich, Conn. He notes that some clients feel that they’ve already provided enough to their descendants during life or have poor relationships with their family members.
Avi Kestenbaum, a partner at Meltzer, Lippe, Goldstein & Breitstone LLP in Mineola, N.Y., says that this issue comes up frequently in his practice with younger single individuals (that is, 40 years old and younger), but not as much with middle-aged and older people, who most often have either a spouse, descendants, or both, or if not, other family members such as siblings or nieces and nephews to whom most of their wealth is going. If these middle-aged and older clients don’t leave their assets to family, he typically sees their wealth going to charities and, very infrequently, to friends.
According to Kestenbaum, younger single people, especially ones who have earned their monies through their own efforts, sometimes consider leaving funds to friends because they don’t feel a family obligation, unless they’re particularly close to a sibling or niece and nephew, or their older parents need the funds. However, with assets such as real estate and monies they’ve actually received from family, his experience is that they feel a greater responsibility and obligation for these assets to stay within the family.
Talk Them Out of It?
If faced with a client who wants to give their assets to friends instead of family, should a practitioner get involved with the client’s decision? Dougherty says he doesn’t try to talk the client out of their decision nor does he encourage them to seek reconciliation with their family in exchange for leaving them money. Instead, he makes sure they consider all of their options (as they may not be aware of other approaches) and how to best structure that decision. Kestenbaum may confront a client in certain situations. He notes that, typically, if a client is estranged from their family, there’s a very difficult, emotional and complex saga involved, and they won’t want to communicate with their estranged relatives. If he thinks the situation might be resolvable, he’ll mention to his clients that their wills are their final communications and may have a fracturing and destructive impact for generations, especially if they disinherit a close relative. They should at least consider trying to make peace if they’re able to and the situation calls for it. However, every one of these estranged situations is very unique and complex, and the specific facts really matter. He notes that he’s not a psychologist, and some of these situations involve prior physical or emotional abuse, mental health issues, bitter and nasty family feuds and other scenarios that might be irreparable. He’s ill-equipped to say or do much personally, other than to listen to his clients’ wishes to disinherit their relatives and feels just the opposite in these situations. Contacting their relatives might cause them further and unnecessary mental anguish, and they shouldn’t do it. So it all depends on the specific facts and circumstances.
Drafting Issues
For clients who’ve made the decision to leave their money to friends, Dougherty suggests that they ensure capable fiduciaries are appointed who will see the wishes through. If the client is leaving assets to family in addition to friends, Dougherty recommends the use of in terrorem clauses to deter family members from contesting the will.
Kestenbaum says he sees fewer restrictions on bequests when assets are left to friends as opposed to family. Most of his clients don’t set up trusts with friends as beneficiaries. The generous and loving gesture is typically for the friends to have the assets free and clear and to do with the assets as the friends please. Often with family members, the thought is to protect them from divorces, creditors and taxes and ensure the assets remain in the family. Clients don’t want their descendants to give away assets or to spend them frivolously. If the assets are going to friends, usually most of these concerns don’t apply, the fees and expenses on complex terms might not be worthwhile and the general thought is for the friends to get the assets and do with them as the friends please.
