- Asset Protection Planning
- Business Succession Planning
- Charitable Giving
- Disability and Special Needs
- Elder Law
- Executor and Trustee Responsibilities
- Financial Powers of Attorney
- Inheritance Planning
- Lifetime Gifts
- Medical Directives
- Planning for Minors
- Retirement Accounts
Treating Your Children Fairly (But Not Necessarily Equally) In Your Estate Plan
Most parents want to treat their children fairly in their estate planning, and many assume that means having their children inherit equally. But fair does not necessarily mean equal. There may be special circumstances to consider before you divide the family pie into equal parts:
- You may want to leave more to a child who struggles to support a family on a modest teacher’s salary than to another child who is a successful professional without children.
- You may want to compensate a child who has given up part of the child’s own life to care for you.
- You may have a much younger child who will need care longer than your older children.
- You may have a special needs child who will need care for the child’s lifetime.
- You may have one child who has joined the family business and other children who have not. Instead of making them all equal owners in the business, you may want to leave the business to the one who has shown an interest and compensate the others with other assets.
Distribution of Inheritances May Vary
Not only do you need to decide how much each child should receive, but also when the child will receive it—and that can be different for each child, too. You can distribute their inheritances in one lump sum or installments, or you can keep an inheritance in a trust. Consider how much the inheritance is, their ages and family situation, how they have handled their own money, and how much they need your money. Consider the following examples:
- If your children are older and they have shown responsibility with their own money, then you may be fine with them inheriting a lump sum.
- If you have an adult child who is struggling to save to buy a home, then you may want to provide a distribution immediately upon your death and distribute the rest later.
- If your children are young adults, you may want them to inherit in installments to give them several chances to become responsible with money.
Benefits of Keeping Inheritances in a Trust
These days, many parents do not distribute inheritances at all and decide to keep the money in a trust for their children. Your trustee can make periodic distributions based on guidelines you provide, but assets that stay in the trust are protected from irresponsible spending, creditors (bankruptcy and divorce), and predators (those with undue influence on your child). The following circumstances might warrant this:
- You have a child who is irresponsible with money or has dependency issues.
- You are concerned that a child’s current or future marriage might end in divorce, and you do not want the ex-spouse to receive part of the inheritance in the divorce settlement.
- Your child is easily influenced by others who may encourage irresponsible spending.
- You are concerned the inheritance may be exposed to possible future lawsuits or creditors.
Benefits of Making Some Distributions Now
If you can afford it, you may want to consider giving your children some of their inheritance now, while you are living. Of course, you first need to make sure you have enough to provide for you and your spouse if you are married. But if your spouse is much younger (for example, if this is a second marriage), your children may never see their inheritances if they have to wait for the surviving spouse to die.
The benefit to you is that you will be able to see the results of your gifts—seeing your grandchildren go to college or your children buy a home, start a business, or be able to stay at home to raise your grandchildren—and know this may not have happened without your help. Also, any gifts you make now will reduce the amount of estate taxes that may be due at your death.
Should They Inherit Everything You Own?
Most parents want to leave their children enough that they can do anything they want, but not so much that they will do nothing at all. You do not have to leave everything to your children. If you have sizable assets, you can set up trusts for your grandchildren and future generations. You can also make contributions to charitable, educational, and religious organizations.