4 Ways to Minimize Inheritance Disputes through Financial Planning

During your financial planning, you likely have considered who will end up with your money once you’re gone.

If you don’t use all of your saved and invested wealth during retirement, you might decide to leave it to your children. But how do you decide who gets what?

The 2015 U.S. Trust Insights on Wealth and Worth survey found 6 in 10 wealthy Americans believe it is important to leave a financial legacy for the next generation. If you intend to provide your children with an inheritance – and you want to preserve family harmony – it’s important to clearly understand the story your inheritance choices will tell them.

Minimizing Inheritance Disputes Through Financial Planning

What often seems like the simplest choice – dividing assets equally among – becomes quite tricky when it comes to children.

Your daughter may have children of her own and believe she deserves a bigger slice of financial pie because she has dependents. Your son may believe he deserves more because he was the primary caregiver when you were ill.

And if you have a blend of full, half, and stepchildren, do you leave the money to those who are biologically yours, or will all parents divide their inheritance equally?

Determining an equitable division of assets is never easy, not even for single parents or couples in traditional families.

For example, what do you do if one child has a disability or health problem that leaves them with extra bills? Or if one child runs the family business, or if one has made life decisions you’re uncomfortable supporting?

If your family circumstances necessitate an uneven distribution of assets, there are a myriad of ways to try to minimize the conflicts that may accompany this decision.

During your financial planning, consider the following options:

Acting Discretely

If you’ve decided an unequal division of assets is necessary and know your children will not be happy with your decision, consider establishing a discrete trust for each child.

The advantages of discrete trusts are they can be funded unequally, with unique distribution triggers and incentives for each one. Each child will only know the provisions of his or her trust unless they share that information with one another.

Establishing a Shared Trust

You can also split some of your money evenly, but then leave a portion of it – maybe 25% – for any child who may have an emergency need. The trust should have an objective third-party trustee who will be responsible for distributing funds fairly.

Choosing Your Executor Carefully

Some say it’s best to follow the family hierarchy and make your oldest child the executor of your estate, while others prefer to choose a family member who is organized, hardworking, honest, and a good communicator. You could also appoint a committee of executors because of the checks and balances a group provides.

No matter what you decide, make sure everyone understands your choice. You don’t want one child thinking you were “playing favorites” or treating them unfairly by not making them the executor, and you don’t want any to be left with the burden of acting as executor when they don’t want the responsibility.

Explaining Your Thinking

The difference between family harmony and an ongoing feud may be determined by how clearly you communicate with your family. Try to be open about your planning early, so no one is surprised after you’re gone.

Not sure how to start the conversation?

Work with Brett Pittsenbargar to receive your Five Wishes Living Will

The Five Wishes Living Will makes it easy to start the conversation about end-of-life care and decisions. Contact Brett Pittsenbargar in Austin TX today for your free copy and help your family make these important decisions.