Most parents want to treat their children fairly in their estate planning. Many people assume that means having their children inherit equally. But fair does not necessarily mean equal. There may be special circumstances to consider.
Not only do parents need to decide how much each child should receive, but also when they will receive it. The answer to that question can be different for each child, too. Inheritances can be distributed in one lump sum or in installments over time. Or, an inheritance can stay in a trust for the child’s entire lifetime. Parents should consider the estimated value of the inheritance, each child’s age and family situation, how they have handled their own money, and how much they need the inheritance.
Many parents decide to keep the money in a trust for their children. That’s because assets that stay in the trust are protected from irresponsible spending, creditors (bankruptcy and divorce), and predators (those with undue influence on a child). The trustee can still make periodic distributions to the child based on guidelines provided in the trust document. This can be a good solution when a child is irresponsible with money or has dependency issues, when there is concern that a current or future marriage might end in divorce and the parents want to protect the inheritance from being part of a divorce settlement, or when there is a concern that the inheritance may be exposed to future lawsuits or creditors of the children.
If you can afford it, you may want to consider giving your children some of their inheritance now so you can see the results of your gifts. Seeing your children buy a home, start a business, or be able to stay at home and raise your grandchildren, or seeing your grandchildren go to college, and knowing this may not have happened without your help, can be very heartwarming. Also, gifts made now will reduce the amount of estate taxes that may be due at your death.
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 don’t have to leave everything to your children. If you have sizeable assets, you can set up trusts for your grandchildren and future generations and/or make contributions to charitable, educational, and religious organizations.
Planning your estate? Angela Klenk, Esq. and the team at Beach Cities Estate Law couple personalized attention with big law firm experience for a winning combination to give you peace of mind. To schedule a consultation, visit Beach Cities Estate Law online or call (424) 400-2125.