Estate planning Part 3: The continuing story of my father’s wrong-headed and destructive estate planning

Barbara Blouin, The Inheritance Project

Brief resumé of part one: in the first part of this account I described how Father had created, in the words of my trust officer, “The most rigid trust I have ever seen.” He also gave his grandson (my son) over $100,000 at the age of eighteen—no strings attached—without ever telling me or my son.

 What happened next was the most appalling of all of Father’s money-control strategies. Father was quite old by this time and in poor health. He was in a nursing home with a private-duty nurse named Judy. Judy and I had become friends. One day she called me to tell me that Father had received a thick envelope from the trust company. It was a codicil to his will. He’d changed his will so that my stepson, nine years younger than my first son, would not be eligible to receive anything from Father’s will. (At that period in my life I was living with the man who was to become my second husband. His son, only four years old, had been abandoned by his birth mother when he was a baby, and his father was a single parent. I decided to help raise the little boy.) Judy sent me the codicil, which stated: “No child by adoption shall be eligible to receive a bequest in my will.” At that point not only was I not yet married to the child’s father, it had never occurred to me to adopt him. (I did, however, adopt him about four years later.) Father’s codicil clearly showed me an uncomfortable truth: he would not let any child of mine get any of his money unless that child was my biological child—that is, if he had Schwartz DNA in his cells.

This act has created a deep and painful rift in our “blended family,” one that has never completely healed. My oldest son had inherited well over $100,000 at eighteen (and he will receive much more after my death), while his younger brother had receives nothing at all, and never will.

Although there is an age difference of nine years between my son and my stepson, my son has always been a caring older brother. But there was nothing he could do, and nothing I could do. I knew that even if I got down on my knees before Father and begged him to change his mind, he would never yield. Over the next years I did as much as I could to make this wealth gap slightly less painful for my stepson. I financed several educational programs for him (he never liked academic programs, but he was artistic) and a short course in entrepreneurship, which he didn’t complete.

After that he started working and was more or less self-supporting, but there were many times in his life (he is now thirty-eight) when he needed financial help, and I provided it. One day when he was talking about his money problems (we expected him to support himself because he was, by this time, a young adult), I asked him how he felt about the enormous difference in wealth between himself and his older brother. He paused, then said, “I’m not happy about it.” He was right! It was unfair and caused him unnecessary pain. Without even thinking about it I wrote a check for $10. Handing it to him, I said, “There is no way I can level the playing field with your brother, but I want you to have this. Please use it carefully. Don’t spend it too fast (my stepson had a tendency to spend carelessly). And save some of it.”

He was in tears. He was so grateful! He promised he wouldn’t squander the money. I never asked him to give me an accounting, but within just a few months it became clear that the money was gone.

Time to shift to another part of Father’s toxic legacy: Our family had moved to Canada in 1981. I had a friend, also U.S.-born, who was an attorney. She knew about the circumstances of my irrevocable trust. She told me that according to the Canadian tax code, once a foreign trust has been “moved” to Canada (this means essentially that the trust beneficiary has moved to Canada and has a Canadian address), ten years after moving to Canada the trust would be deemed to become a Canadian trust and would be assessed for its appreciation in value between the time the trust was created and the date ten years after I moved to Canada, about forty years. In other words, it is seen as a capital gains tax. Since my trust had been in existence at that point for nearly thirty years and had appreciated enormously, I would have had to pay Canada Revenue Agency tens of thousands of dollars in capital gains.

The only way to avoid this punitive tax would be to dissolve the trust before the 10-year deadline. My lawyer friend wrote a letter to my trust officer, who passed it along to Father. His response was, essentially, “No way! Let her pay the tax.” To describe Father as an angry and controlling man would be an understatement.

There was nothing my friend the lawyer or I could do except to wait until Father had died, in the hope that this would occur before the ten-year deadline. And that is what happened: Father died two or three years later. I wasted no time. Someone recommended a lawyer in Boston: Deborah Kay. Deborah was very skillful. She and I had to deal with a different officer at the trust company because Jack Johnston had retired. Right from the start I found the officer who replaced him cold, rigid, and controlling. Deborah Kay and I called her “the ice queen.” She refused to even consider voluntarily dissolving my trust, but I had a strong case and Deborah Kay, an excellent lawyer. It took us over three years and a lot of fees, but in the end, we won without having to go to court.

That was one of the happiest moments of my life. I would now be in full control of my assets. I didn’t know what to do because I had never had any control of my assets, but I got good advice from friends in Boston, and I choose Julie Goodridge, founder of Northstar Asset Management. Julie is better than I could ever have imagined, and for the first time in my life I was dealing with someone who actually listens to me.

Finally, I want to say something about what I’ve learned from the painful experiences that arose from the way Father handled his estate planning. For a few days I have been tossing around phrases that might impress readers, but to get to the point, it all comes down to this: Give from the heart.