f you are going to leave an inheritance for your children the most important planning tool is communication. As hard as it may be for some, sitting down with your adult children and explaining your wishes is tremendously important in keeping the family together after you are gone.
Roles
Usually, only one child is listed as the agent for durable and healthcare powers of attorney, personal representative, and, when needed, trustee. Most of the time it makes the most sense for only one person to perform any of the above roles, rather than having co-agents, co-personal representative, or co-trustee. While this is the case in many family situations it is crucial that it be communicated to children as to the reason for choosing that child.
Estate Distribution
Sometimes parents may prefer for a specific asset to go to one child over another. This can be for many reasons. It may be personal effects such as jewelry, a gun, or piece of furniture. It may also be a piece of real property for which one child has an attachment.
It is typical for one child to receive more ownership of an operating business in which that child is actively involved. This may be done during the life of the parents or at death.
All of the issues should be communicated to the children, and preferably in a family meeting, where questions and opinions can be addressed. This is an opportunity to make a family stronger. If these are not communicated adequately then it can divide a family forever.
Fair Does Not Always Mean Equal
As Ron Blue eloquently said in his book Splitting Heirs, “fair does not always mean equal.” A case where this could happen is when a child has a special needs that requires assets to provide for necessary care for the remainder of their life. It may also be divided unequally when one child is very financially successful and another has chosen a noble career that provides meager means, such as missionary or in other non-profit type organizations. Also, when a child has a major addiction problem or a child has been a disaster with managing their own resources. There even may be a reason to completely disinherit a child.
A Couple Of Real Examples
Example 1:
A client’s step mother passed away a couple of years ago. She had no children of her own. At the father’s death the assets in his name went into a trust to benefit the step mom and at her death go to the children equally. All three children had a good relationship with their step mother and each other. However, at her death one child got 70%, another 30% and another 0%. None of them could understand why there was a difference. It created friction and divided between the siblings.
Example 2:
A friend’s mother-in-law died a couple of years back. His brother-in-law has had a volatile past with finances, etc. Both of the children expected the estate to be split equally but found out that 100% went to the daughter. The brother places blame on his sister even though she had nothing to do with the decision. Now they are estranged.
Communication is Key
If parents could just step out of their comfort zone and address their children as parents should much of the family discourse could be avoided. This is crucial to keeping the family together after parents are gone. Our recommendation is for parents to communicate their wishes to their children by at least age 70. It is preferable to put this in writing, in addition to what is written in the wills or trusts documents.
Leaving a legacy is more than just leaving assets (stuff). It is about leaving a strong and intact family bond.