Every family with children has unique circumstances as far as wealth, financial planning and plans for the future. Therefore, it is critical that you consider your individual beneficiaries’ circumstances, when it comes to estate planning.
Kiplinger’s recent article entitled “Estate Planning for ‘Black Sheep’ Beneficiaries” explains that this may take the shape of child with a substance abuse issue or a lack of financial acumen and responsibility. You also may want to reward certain behaviors in the future. All these situations can be addressed thoughtfully and effectively in your estate planning documents with the help of an experienced estate planning attorney. Let’s dispel some of the common myths surrounding these issues:
Myth #1: You are required to split your estate evenly among your children. Disinheriting a beneficiary happens a lot. It can occur for a variety of reasons that have nothing to do with disapproval of a potential beneficiary’s lifestyle choices. Unequal distributions are often used to even out previous gifts or support that were given to one child. Regardless of the reason for disinheriting completely or making unequal distributions, it’s best to discuss this in your estate documents or in a separate letter. Give the reasons for your decision to head off any possible claim against the estate or even just hard feelings among family members.
Myth #2: Once you’ve disinherited your black sheep child, it’s irreversible. Not so. You should review your estate planning choices regularly because situations change (hopefully for the better), and you can revise your estate plan to provide incentives for your beneficiary to continue making progress.
Myth #3: You have no control of the issue after you pass away. While there’s no direct control after you die, you can make specific instructions in your trust to reward and motivate your black sheep child to behave in a certain fashion. You can also treat the share of inheritance for one beneficiary differently than others. Therefore, a financially responsible child may be allowed to access such a share of the estate in one lump sum; but you create a trust for the second child who might be in a more unique situation.
Myth #4: Trusts are huge hassle. Certain trusts permit you to name a person to help your beneficiary manage their inheritance. This can be a family member or friend, as well as a professional trustee who will assume the administrative responsibilities of a trust. The burden of managing the trust for a wayward child does not have to fall on a family member if you name a corporate trustee to assist.
Don’t avoid the subject of estate planning. Work with an experienced estate planning attorney and discuss the options available. Contact us if you have questions about your own situation.
Reference: Kiplinger (Dec. 8, 2020) “Estate Planning for ‘Black Sheep’ Beneficiaries”