Presented by Jonathan S Merckens, CFP ®
You may have a will in place, but have you taken steps to ensure that your children won’t be left bickering over inheritances once you’ve passed away? In even the most close-knit clan, grief over a family member’s passing can bring tensions to the surface, especially when money is involved.
A Typical Scenario
Throughout their marriage, John and Jane Smith had kept a close eye on their fi nances. Working with their financial advisor, they’d saved and invested carefully over the years, and they planned to leave a sizable inheritance to their three children, Jack, Olivia, and Harry. Unfortunately, though they had prepared a will, John and Jane failed to outline exactly who would get what. They named Jack, the eldest child, as the benefi ciary on their life insurance policy and other accounts, assuming he would divide up the funds equally. They left meaningful family jewelry to Olivia, because she was their lone daughter, and gave Harry all of their artwork, since he loved to paint.
Because the children had always been so close and gotten along so well, John and Jane figured they would split everything three ways and, if someone wanted a specific item, they’d work out an equitable arrangement. But things didn’t turn out as the Smiths had planned. Upon discovering that he was the sole legal beneficiary of his parents’ accounts, Jack decided to keep the money for himself, using it to pay for the vacation house he and his wife had long dreamed of buying. In his view, Olivia and Harry had received their fair share of the family estate and there was no need to split the money three ways. A family inheritance feud ensued, with Olivia and Harry vowing never to speak to Jack again.
Tips for Keeping the Peace
You may be thinking, “That would never happen to my family!” But situations like this are all too common. To help prevent inheritance conflict among your children, consider these suggestions:
• Be realistic and communicate openly. Your children may be expecting a significant inheritance, one that could help them purchase a home, pay for their children’s education, or simply make them rich. To avoid disappointment, it’s important to give them a sense of where you stand financially and to emphasize that your finances may change, depending on medical expenses or other unexpected costs.
• Keep your documents up to date. Be sure to update your will and beneficiary designations to reflect life events such as marriages, divorces, new grandchildren, and so on. Keeping your documents current will help ensure that you don’t unintentionally include someone who’s no longer part of your family or exclude someone you wish to benefit.
• Address personal property specifically and separately. In addition to your will, leave a separate list of personal property with instructions detailing who should inherit each item. The list should describe each piece of property you wish to gift, leaving no room for interpretation.
• Don’t task the oldest beneficiary with distributing your assets. It’s not wise to leave one child to handle the distribution of your assets, trusting he or she will do the right thing. If you want all of your children to inherit equally, put them all down as benefi ciaries.
• Give everyone a role. Dividing assets equally can help reduce conflict among heirs, but it’s important to think about the division of responsibilities as well. When you assign responsibility for handling your estate, you’re making a statement about whom you think is capable and trustworthy. Consider how your children will react and, if possible, assign everyone a role, even a small one, to play in the decision-making.
• Explain yourself. What happens if you don’t want to split your assets equally among your children? Many parents consider this option if one child is fi nancially successful while another is struggling. If you plan to distribute your assets unequally, write a personal note to accompany the will, explaining your reasoning. This may help reduce any resentment your heirs may feel.
• Eliminate uncertainty with a trust. A common estate planning tool, a trust can help you manage and control the distribution of your assets
in the event of your death. Through a trust, you can elect to distribute your assets in increments if you pass away before your children are
mature enough to manage money wisely—for instance, one-third at age 25, another third at 30, and the fi nal installment at age 35. You might also consider using a trust to hold a distribution until a later date if your child has fi nancial problems or creditor concerns.
Protecting your legacy
Though the estate planning process involves many legal responsibilities, it’s important not to lose sight of the personal aspects. If you plan to leave an inheritance to your children, be sure to consider ways to reduce conflict once you’re gone. By carefully planning and setting expectations ahead of time, you’ll help protect the most valuable part of your legacy—your family.
This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Investors should consult a tax preparer, professional tax advisor, and/or lawyer.
Jonathan S Merckens is a nancial planner practicing at 11925 Pearl Road, Suite #403 Strongsville, OH 44136. He o ers securities and advisory services as a registered representative and investment adviser representative of Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser.
For Registered Representatives: Jonathn o ers securities as a Registered Representative of Commonwealth Financial Network®, Member FINRA/SIPC.
Contact Jonathan at (440) 638-4757 or
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