While most parents have the inclination to treat all their children equally when it comes to an inheritance, your personal family lawyer at Legacy Counsel knows that this is not always the wise choice. Here are some scenarios when an unequal distribution may be better:
Children of unequal wealth
If you have one child who is a successful entrepreneur and another who is a social worker, you might want to leave more to the less financially advantaged child. If that’s the case, be sure to either explain it to them beforehand or write a letter to be opened upon your death explaining your reasoning. Since most children equate money with love, you don’t want to leave behind hard feelings.
Poor money manager
If you have a child who is poor at managing money and always in debt, you have an alternative to leaving an inheritance outright: a spendthrift trust. Setting up a trust to disburse certain amounts at predetermined ages, or allocating funds for medical or educational expenses, can protect the inheritance throughout your child’s lifetime. In this case, it is best to name a trustee who is not an immediate family member.
Bad relationships
If you have a child who has one or more divorces or a string of bad relationships, you should probably consider establishing a trust in this case as well to shield assets from divorce.
Special needs child
A child with special needs should be provided for through a special needs trust, which can be established in a way that protects his or her ability to receive necessary governmental assistance.
Child with long-term care needs
If you have a child who has a chronic illness and needs expensive medical treatment, you might want to consider purchasing additional life insurance naming that child as beneficiary. If the child is a minor, you will need to set up a trust as beneficiary of the policy.
Pre-existing loans
If you have made substantial loans to one child and not the others, you may wish to count those as an early inheritance and take them into account before estate assets are distributed.
Estranged children
In some cases, parents want to disinherit a child. If you do decide to take this path, your planning documents need to be clear that you are intentionally disinheriting the child and not just simply leave them out of your estate plan.
If you’d like to learn more about creating a personal estate plan, call our office today to schedule a time for us to sit down and talk.
This article is a service of Legacy Counsel PLC. We don’t just draft documents; we ensure that you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Legacy Planning Session, during which you will get more financially organized than you’ve ever been before and become empowered to make all the best choices for the people you love. You can begin by calling our office today to schedule a Legacy Planning Session. Mention this article to find out how to get this $750 session at no charge.
This article is a service of Legacy Counsel PLC, an estate planning law firm in Saint Joseph, Michigan.
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