Treating Children Equally in Estate Planning Is a Mistake
NEW YORK (TheStreet) -- The most common refrain I hear when assisting clients with estate planning is that they want to treat their children equally. It's a parent's instinctual, default position. However, it can be a flawed position to lead from. In some cases, you might need to treat your children differently when it comes to gifting and estate planning. Notice I said differently but not unequally.
So what are some examples of treating your adult children differently:
|Thinking of your children as equals does not mean you shouldn't treat them differently in estate planning.|
In the first example, naming all your children as co-executors may seem like the right thing to do. However, I recommend selecting the child who is most capable and trust worthy of managing the responsibilities of the estate. Naming multiple co-executors is a recipe for disaster with your adult children behaving like school children. The goal should be to name the person most able to handle your estate affairs expeditiously and effectively. In some families that may mean naming a third party such as a trusted family friend, relative, or professional to be your executor.
The second and third examples both point to one of your children having capacity issues -- i.e. special needs, creditor issues -- or possibly drug or alcohol problems. In any of these cases giving the money directly to your adult child is actually not in their best interests. For example, in the case of a special needs child leaving them money outright might jeopardize governmental benefits they currently receive. In this case proper financial planning involves seeing a competent estate planning attorney who specializes in creating special needs trusts.For adult children with creditor issues or substance abuse problems leaving them or gifting them money outright is not in their best interests, either. If an adult child with creditor issues inherits outright under the will their inheritance is fair game for creditors. What that means on a practical level is their bank accounts could be swept by creditors looking to recoup unpaid bills. The child with substance abuse issues certainly will not benefit from receiving an inheritance outright. In both of these cases leaving money via a trust is a better alternative.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV