Avoiding Inheritance Conflict in Your Family
Even in the most close-knit families, an inheritance can cause a feud if the deceased hasn't left a detailed plan. You might be thinking, "That would never happen to my family!" Unfortunately, family feuds over inheritances are all too common.
To help ensure that your clan won't be left bickering about money after you pass away, here are some tips to consider:
- Be realistic and communicate openly. Your children may be depending on a significant inheritance to help them purchase a home, pay for a child's education, or cover another large expense. To avoid disappointment, give them a sense of where you stand financially, emphasizing 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 or exclude anyone.
- Address personal property. 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. Many parents inadvertently create conflict by naming the eldest child as the beneficiary of their assets, expecting him or her to evenly distribute the inheritance to the other siblings. If you want all of your children to inherit equally, put them all down as legal beneficiaries.
- Give everyone a role. 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; 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 financially successful while another is struggling. If you plan to distribute your assets unequally, include a personal note with your will, explaining why you distributed your assets the way you did.
- 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 an inheritance in increments if you pass away before your children are mature enough to manage money wisely. If your child has financial problems or creditor concerns, you might also consider using a trust to hold a distribution until a later date.
Though the estate planning process involves many legal responsibilities, it's important not to lose sight of the personal aspects. 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.
© 2013 Commonwealth Financial Network®