Are you planning on leaving an inheritance for your children when you pass on? According to Accenture, Baby Boomers will leave their children an estimated $300 trillion. This number will rise and fall depending on the economy, the markets, and more. If you are planning to will your assets to your children, you will want to manage your child's expectations by providing open communication.
Fidelity Investments recently discovered that adult children underestimated the value of their parent's estates by about $100,000. Many individuals assumed that they were getting a lot more than their parents had to offer, which can sometimes lead to grave disappointment. While parents shouldn't be expected to lay their financial life out on the table, they should know that they need to inform their children of how much money they should expect.
Also, parents should keep in mind that it is best to leave inheritances that are equal to each child. If you have four children, and give one child half of your inheritance, leaving the other three to split the other half, this can lead to a lot of court battles. Frustrated children may decide to sue in court or contest the will, assuming that their parent was not in his or her right mind when making the arrangements. Avoiding favoritism can help to make the property division and distribution smoother at the end of your life. Also, you should be cautious when choosing children to manage your affairs after your death, and also make sure to level the playing field with this job.
As well, it is important that you intend to do all of the distributing yourself. Don't hand over a life insurance policy to a child and encourage him to divide it up. Oftentimes, children will skew the division so that it is no longer even. This is not fair, and is highly discouraged.
If you distribute unequally, you will want to explain the reasoning for this to your children so that they cannot contest the will. You may even want to sit your children down and explain to them why you have chosen to divide the inheritance the way that you chose to. Also, you will want to use a trust if you wish to eliminate uncertainty. A trust can make it so that the end-of-life inheritance is out in the open.
Some trusts can even distribute the money based on the individual's age, so that one year they will get a third of the money, and then ten years later they can receive another third. If your children are particularly irresponsible with money, this may be the best way to work on your case. It is best to avoid putting stipulations on accessing the trust. For example, if you set up a trust but say that the recipient can only access the money if he goes to college, this could cause legal complications. If you want more information about setting up a will or trust to act as a distribution for your money at the end of your life, then contact an attorney at a local probate firm today!