Children of unequal wealth – If you have one child that is a successful entrepreneur and another that 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. Most children equate money with love, so don’t leave hard feelings behind.
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 a 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, you 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. We normally charge $750 for a Family Wealth Planning Session, but because this planning is so important, I’ve made space for the next two people who mention this article to have a complete planning session at no charge. Call today and mention this article.