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Whether the family includes adults who can’t be trusted with an inheritance or parents who wish to leave different amounts to different children, estate plans can be used to productively address issues while protecting the family’s legacy.
What if there are heirs who can’t manage money?
When an heir can’t manage assets, a trust can be established with language detailing how assets will be distributed. Trusts may be made conditional, requiring the beneficiary to meet certain milestones. Steady employment, a series of negative drug tests, or completing a semester of college could be required before funds are disbursed. In these situations, a professional trustee familiar with trusts, including discretionary provisions, will be a better choice than a sibling, who may struggle with the role of enforcer.
How do you plan for an heir’s possible future divorce?
It is always wise to prepare inheritances for the possibility of divorce, even when it seems unlikely. If the couple doesn’t have a pre- or postnuptial agreement, placing the inheritance in a trust adds a layer of protection, that is useful even if the state’s laws consider an inheritance as separate property. A trust also avoids having inherited assets comingled with marital property. Nevertheless, beneficiaries need to be mindful of this. Once the funds leave the trust and are deposited into joint accounts or used to purchase a jointly owned property, they are no longer separate property.
Do inheritances have to be divided equally?
There is no legal requirement for inheritances to be divided equally among children, although many people do this to prevent resentment. If one child devoted time and sacrificed earnings to care for a parent, or if gifts were made during the parent’s lifetime to one child and not the other, an unequal inheritance may be a way to balance the scales.
If the inheritance is unequal, a frank conversation should take place so heirs understand the parent’s thinking. Leaving a mystery is a poor legacy and could lead to litigation among family members.
Is leaving an inheritance to a minor an alternative to leaving money to a dysfunctional adult?
In a word, no. Grandparents who leave assets to minors have their efforts undone, since minors may not directly inherit or control money or property. The inheritance will be managed by a guardian, which could end up being the parent the grandparents didn’t want to receive the inheritance in the first place.
What is the executor’s role in inheritance and potential disputes?
Choosing an executor can be a challenge when creating an estate plan. Siblings who don’t get along may resent the one in charge. However, naming multiple executors can stall progress in settling the estate if they don’t agree.
Confronting challenging family dynamics when creating an estate plan presents an opportunity for parents to develop a plan for the family’s future. Ignoring the dynamics and leaving it for the children to “work it out” rarely ends well. Depending on the situation and the size of the estate, there are numerous strategies to use.
The best approach is to evaluate your options with an experienced estate planning attorney.
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