Designating heirs in your estate documents is generally simple. If you have one child and want her to be the sole heir, you’ll need to decide whether your gift is given outright or placed in a trust.
Do you have two or more children? Sharing equally is a common strategy. Your attorney drafts documents that minimize legal friction in passing on your estate and, along with your financial advisor, assures financial accounts, real estate, and other property and assets are titled, or designated appropriately.
But, what if?
Or perhaps there are other circumstances to consider:
You may have made early gifts. Often, parents help their children with down payments on homes, education expenses for grandchildren, and other reasons. Had they not, the financial assets in their final estates might have been larger. While the intuitive solution is to reduce the share of the final estate to the heir receiving the early gift by the same amount, it does not account for the early gift’s impact on the final estate, and particularly the impact of inflation.
Your estate might include a home or business that you want kept in the family, a vacation home for example you want your heirs to share. However, your heirs’ interest and resources to maintain it may differ. Some may prefer the home sold. While the scenario you imagined may work for the first generation, the probability of a harmonious outcome declines once shares pass to their heirs.
These are only a few situations that may complicate your efforts to ensure an equitable division of assets among heirs. While your estate is evidence of your responsible financial stewardship, your legacy will be determined largely by your success in encouraging harmony, limiting potential for disputes, and preserving family relationships.
So, talk to your heirs while you can. Encourage your attorney, tax professional and financial advisor to communicate. Permission to share drafts of documents and financial information would be a good start.
Good planning drives better outcomes.
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