Get Your Children Ready for Their Inheritance
“What will happen to my estate when I am gone?” The topic makes many of us a bit uneasy. Talk of death and inheritance is strictly taboo in many families. But not addressing these issues can have serious consequences in the long run.
The obvious problem: Misunderstandings between siblings over their parents’ estates can lead to hurt feelings, mismanagement of funds and family feuding that can go on for years. Such cat-on-a-hot-tin-roof bickering is more common than most of us would like to admit.
It can also lead to feelings of guilt, as children grapple with the idea of profiting from their parents’ deaths.
The best solution: Avoid even the potential for conflict or misunderstandings by mapping out your estate distribution strategy in advance. Here are some guidelines to help you and your children prepare for their inheritance:
1. Give serious thought to how you want your estate distributed. Within very broad guidelines, you can do just about anything you want. But if you don’t decide, the state will decide for you…with no regard for your wishes.
2. Do an estate inventory, and then update it every year or two. This need not be an elaborate ordeal — just a listing of assets and their approximate value.
3. Talk to your children and other heirs. If possible, meet with each individually to provide a broad-brush overview of your intentions. For example, if your son is a successful lawyer and your daughter is a struggling artist, you may want to give a larger share to your daughter. Explaining this to your son may help avoid bitter feelings later.
4. Listen to your children and other heirs. Get their opinions and reactions. Maybe Betty doesn’t want the vacation cottage you considered leaving to her; or Roger prefers that at least some of his inheritance go instead into trusts for his children’s college educations.
5. Make a “special bequests” list of specific items. It should include things a child, grandchild or close friend has expressed an interest in…such as the piano admired by your granddaughter or the ring you promised to your daughter-in-law. This list, which should become a part of your will, can help avoid misunderstandings among your heirs. Just as important, it will assure that your wishes are followed.
6. Use life insurance to even out your distributions and also protect a surviving spouse. If you give Angie your $150,000 business, the beset way to provide fairly for Jonny is with $150,000 of life insurance on your life. Also, consider life insurance to assure that your spouse (assuming he or she outlives you) is well cared for.
7. Talk to an experienced estate planning attorney about your options. You may be pleasantly surprised at how many there are. They can include everything from trusts to lifetime gifts and, of course, your will. If you already have a will, make sure it is current. Your will is one of the most important tools for an orderly, peaceful distribution of your estate.
8. Review your estate planning goals, needs and potential tax liabilities with your attorney and your insurance agent. Estate and other taxes can slice a major piece off your children’s shares. However, there are a number of ways to conserve the estate you’ve built. This includes the potential to save many thousands of dollars in unnecessary costs and taxes. Among the options you may want to consider: life insurance, lifetime gifts and trusts.
9. Select an executor who you believe can represent you effectively and with whom your heirs can work. Perhaps a qualified family member — such as your daughter, the CPA — can serve as executor. However, if there is the potential for sibling conflicts, consider a trusted outsider.
10. Consider periodic family meetings to discuss your plans and get ongoing input as families and objectives change.
The decisions you make show a caring commitment to your heirs. Take the time to plan today, and to prepare yourself and your children for their inheritance. Do it for your peace of mind and the sake of your family.
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