Leaving An Inheritance For Your Children: Exploring Estate Planning Opportunities
Over the next 30 to 40 years, baby boomer parents are expected to leave about $30 trillion to their millennial offspring. These numbers, anticipated by consulting firm Accenture, can rise or fall depending on the economy, the markets, how long parents live, etc. One thing is for certain, inheritance is a big issue for both parents and their children. If you are planning to leave a sizeable amount to those you love, as most parents do, you must go about it in the right way.
Here at Temple & Frayer, we understand the importance of planning properly for your inheritance. Below, we have provided helpful tips and information on how to leave an inheritance to your children that they will benefit from for many years to come. Please call a Pittsburgh estate planning lawyer at our firm for additional information and personalized guidance for your situation.
Leaving An Inheritance The Right Way
A recent survey conducted by Fidelity Investments showed that children often underestimated the size and value of their parents’ estate by nearly $100,000. The first step in planning to leave an inheritance is to manage expectations with open communication. This means that you should give your loved ones some sense of where you stand financially and an accurate estimate of what they are likely to receive after you are gone. This does not mean that you must disclose all of your finances, but it does mean that your children should have a basic understanding of where you stand financially. You should also inform your loved ones that situations can change if more money needs to be spent on medical care or if other circumstances arise.
Secondly, you should try your best to level the playing field. Treating your kids equally might be difficult, but it usually helps during this process. By treating your children equally, you can minimize fighting and simplify the process. This mindset applies not only to assets but also to choosing who will be responsible to settle your affairs. Keep in mind that you are making a statement about who you think is worthy of your trust and capable of handling responsibility, so you should also keep in mind their feelings.
The next part of planning to leave an inheritance involves the distribution of your assets. We recommend doing the distribution by yourself. In order to avoid headaches and rivalry, you should avoid the situation where you name your oldest child as a beneficiary and trust him or her to split up the rest of your assets among the other siblings. If you have art, jewelry, or other items that you have a specific purpose for, you should make a list of who receives what, as well as a method for dividing up whatever assets are left.
If you distribute unequally, explain your reasoning. Parents often choose to distribute their estate and assets a certain way, but they fail to explain why they choose to do so. This can lead to resentment which can easily be avoided by providing a simple explanation.
Use a trust to eliminate any uncertainties. If you want to know for certain that your children or loved ones will use your money wisely, you should consider putting it in a trust with few strings attached. Our firm typically advises that you distribute your assets in chunks based on the age of your children if this is a concern. The mindset behind this approach is that maturity will bring about better financial decision-making, and you can also specify that your children are not allowed to receive their inheritance if they are dealing with substance abuse. You must be careful of using an incentive trust, however, because these documents create stipulations that must be met before an inheritance is granted.
Thinking Through Your Inheritance Options
Our Pittsburgh inheritance lawyers are available to help you start thinking through your inheritance today, and we have years of experience in this area of law. There are many factors to take into consideration, especially if you are a business owner, and we will ensure that you have the information you need to make wise decisions. There are certain situations, such as when a child is suffering from a medical disability, where you may need to divide your estate unequally among your children. We will help you work through these factors and other scenarios that you may not have considered. Call our firm at 412-998-1197 or email us today.