June 23, 2020 — Note: This article starts with the premise that it is crucial for every person of retirement age (and younger) to have a will and/or an estate plan, no matter how small the assets you own. If you don’t have a legal document, you are going to leave a huge mess for your heirs to clean up, you will waste money on probate expenses, and perhaps end up with a result you wouldn’t like.
Every family is different in so many ways. Couples might have children that are equally successful and get along well. But for family like that there are those with a child who has had a hard time, a disability, or other issue. Families with stepchildren face additional challenges. Many people worry about a child they feel is not responsible, and who might squander any bequest on drugs, gambling, etc. There might be a family business where one or more siblings, but not all, are actively working. It can get very complicated. And, your children probably know if have already substantially helped one child financially more than the others.
Even with the best planning divvying up an estate can cause problems. If you divide everything equally, the child who has greater needs might feel neglected (and you might feel guilty). If you give more to the children who need more, the others might feel like they have had a success tax levied against them.
Nerdwallet recently published an article, “Should You Leave Your Children an Equal Inheritance“. In it, Colleen Carcone, a tax and estate planning attorney and co-author of “Principles of Estate Planning” says that: “Money can cause family discord, and you want to make sure that you are thinking through this and keeping sibling relationships intact.” One of the key pieces of advice mentioned in that article is the need to discuss your plans in advance with your children or heirs. If you discuss things you might find out, for example, that your wealthier children might not be interested in money, but perhaps want a particular heirloom. You might many valuable or sentimental objects, and finding out preferences would be useful in avoiding battles later on. If you discover that your heirs have unrealistic expectations or splitting assets might cause problems, you will see the need to be more specific in your plans. Family businesses have unique problems, particularly when not all members of family work there.
Carcone also advocates leaving a detailed letter behind that explains your decisions. She posits that this can help stave off family feuds because at least your heirs understand your wishes and motivations better.
Vacation homes are another hot spot for estates. Even when all the children get along, splitting a home in a popular and nostalgic destination can be problematic. By discussing this in advance you might get a better understanding of the issues that could come up, and find a solution that serves the greatest good.
Bottom line. If you don’t have a will and a letter, get started on it. If it has been a long time since they were written, do a refresher. Schedule a talk with your children so they know your plans and you understand what their preferences might be. Please write your experiences and thoughts in the Comments section below.
For further reading:
Wills, Estates, and Trusts: War Stories from a Career Trust Officer