Historically, it has been the most common of scenarios in estate planning:  Spouses or partners decide to leave everything to their three children, “share and share alike.”  And everyone lives happily ever after.   There are times, though, when the fairy tale goes awry.

Parents often find themselves with the realization that they have benefitted one of their children to a much greater degree than the others.  They have given land to a son to build a home, but the daughter moved out of state.  One child may have faced job loss or health issues. Or one of the children has devoted years to caring for the parents to the detriment of his or her career and Social Security earnings record.  No matter the reason, the predicament is the same.  How can they treat everyone fairly?

There are common approaches to this dilemma. Certain families choose to make “extra” gifts in their estate plans to children who did not receive lifetime gifts.  The money can come from within the estate if there is enough.  It is not unusual for an estate to have cash flow problems, though.  In those instances, there may be beneficiary designations on life insurance or retirement accounts that can be set up to provide a greater (or lesser) share to a particular child.  Another method is to reduce the share of the child who benefitted more during lifetime. This tactic is often accompanied by a statement in the Will expressing the desire to have everyone treated equally.

Many families have made “loans” to children, with varying degrees of repayment success.  If a child has not paid back what he owes, the parent can reduce his share by the amount due or even forgive it all together.  Forgiveness may or may not lead to gifts for the other kids in the same amount.  When dealing with a loan, it is of the utmost importance to maintain good records of the total amount, any payments, and forgiveness intent (or not).  Make sure your Executor knows exactly where to find those records. A detailed and current accounting will promote transparency all around.  It is best to discuss your intent with your attorney as forgiveness of debt at death may lead to an unintended inheritance taxable event.

In some families, everyone knows exactly what everyone else has received, and in others, there is veiled knowledge.  Occasionally, there is total darkness.  Regardless of the family dynamics, it is likely that there will be confusion (at best) or hurt feelings or jealousies (at worst).  Consider the beauty and elegance of an old-fashioned note. A kindly worded missive in familiar handwriting can explain why certain decisions have been made and the heartfelt intentions behind them.  In the end, the most valued gift will be that of clarity and peace of mind.

 

 

 

 

 

Marshall, Parker & Weber is open and available to help you assess what documents you may need or whether your current plan is in good shape. Call us at 800-401-4552 to schedule an appointment. You can also check out our portal for complimentary blog articles, videos and webinars.
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