For most people, a primary goal of estate planning is to create a roadmap for the distribution of their estate assets when they are gone. If you are at that point of your estate planning process, and you have adult children, you may be wrestling with some difficult decisions. Chief among those is whether to divide your estate assets equally among your children. The pressure is often great to do so; however, you have valid reasons to resist that pressure. A Grand Forks estate planning attorney at German Law discusses the pressure to gift equally and offers options that may help relieve that pressure.
The Pressure to Not Play Favorites
As a parent you undoubtedly have long felt the pressure to treat your children equally and not play favorites. That same pressure often asserts itself when it comes time to think about how to distribute your estate. When your children are minors, deciding how to divide your estate is less complicated. You will likely create a trust and let the trust protect all assets while the children are minors. If the trust has assets left when the children reach adulthood, those assets are split equally among the children. Deciding to divide your estate equally among your minor children is an easy decision because there are no extenuating circumstances to consider at that point.
Once your children reach adulthood, those “extenuating circumstances” may become problematic. Although it is common to feel compelled to leave behind an equal inheritance, those circumstances may provide legitimate reasons to rethink how you distribute your estate. Moreover, the bottom line is that the assets you have accumulated over the course of your lifetime are yours to gift any way you wish to without the need for explanations.
You are not playing favorites; however, there are circumstances that give you pause when you contemplate handing over a valuable inheritance to one of your children, such as:
- The addict – no parent wants to admit that a child has an addiction; however, if you have an adult child with a drug, alcohol, gambling, or other addiction, it is imperative that you face that reality when making estate planning decisions. Handing an addict a large sum of money is usually akin to throwing that money in the trash.
- The in-law – adult children frequently marry, resulting in a son-in-law or daughter-in-law. The moment the ink is dry on the marriage certificate, your new in-law becomes a potential threat to your assets. Anything you gift to your child could be lost in a subsequent divorce or as a result of mismanagement by the new in-law.
- The mental health issue – if your child suffers from a mental health issue, managing an inheritance may be asking a lot. If your child has special needs, receiving an inheritance could also jeopardize his/her eligibility for much needed state and federal assistance programs such as Medicaid and SSI.
- The spendthrift – most families have one – that family member who simply isn’t good with money. No matter how many conversations you have with this child about responsible financial planning and spending, he/she ends up with money problems yet again.
Estate Planning Can Help
If you are concerned that a beneficiary will squander a lump sum that is gifted directly, using a trust to distribute that individual’s inheritance may be a better option. A trust allows you to effectively retain a certain degree of control over the assets gifted even after you are gone. A Trustee, appointed by you, manages the assets and distributes them according to terms that are also created by you. This allows you to stagger the inheritance, or to distribute it in small amounts on a monthly or yearly basis. You can even decide what the trust assets can be used for if you are concerned about how they will be used by the beneficiary. For example, if you want the assets to be used to pay a mortgage payment or rent only, you can set up the trust to make those payments directly. You could also insist that the assets only be used for educational purposes or for medical bills. As the Settlor (creator) of the trust, you create the terms.
Contact a Grand Forks Estate Planning Attorney
Please join us for an upcoming FREE seminar. If you have additional questions about how to distribute your estate among your children, or you have other estate planning questions, contact a Grand Forks estate planning attorney at German Law by calling 701-738-0060 to schedule an appointment.