It’s very common when clients talk about estate planning for them to speak about “treating all the kids equally.” It’s understandable. We all love our kids. But there are times when the situation calls for something other than a mathematical split of an inheritance among all the kids.
Often, these situations are complex and they benefit from thinking them through in advance and, maybe, getting some professional advice from an experienced, well-trained CERTIFIED FINANCIAL PLANNER™ professional. I am a CFP® professional, I work as an advocate for my client’s best interests – a fiduciary financial planner, and I would love to visit with you about how these issues affect your financial plans. Just follow this LINK to find a time for us to talk.
Here are a few specific situations where you might consider treating one or more children differently from the others:
Child as Caregiver
If one child takes primary responsibility for assistance and care for an elderly parent, it might make sense to adjust inheritance to acknowledge this contribution. Paying for professional help for a parent is quite expensive and having one child willing to provide this assistance is a material help to the entire family.
Sometimes the child lives with the parent. It may make sense to leave the family home to the caregiver-child exclusively. This could be done via transfer-on-death deed, a trust that grants lifetime use, or other techniques.
Similarly, a parent may wish to give the caregiver-child a larger percentage of the overall inheritance in recognition of the additional help provided.
A Child with Special Needs
For a family with a special needs child, parents will want to be sure the estate provides for that child’s needs. Sometimes, there can be state-specific benefits for the child. Those benefits could be affected by inheritance. The family will want to consider a special needs trust or supplemental needs trust for the child. And, the family might choose to provide more, or less, than an equal share of the estate for the use of the special-needs child. Many times, siblings are involved in care for a special-needs sibling and will be part of the estate planning conversation.
A Child with Issues
If a child has issues, such as mental illness, substance abuse, divorce, gambling addiction, or if the child is bad with money, the family may want to account for this in the estate plan. Sometimes, it means excluding the child in question from the estate, but other times, a specific estate arrangement can provide for the child with issues in other ways. An estate planning attorney will have guidance about the best techniques for your situation.
Children With Wealth Disparities
In some families, one or more children have been very successful, while others have struggled. Some families determine to structure the estate to treat each child differently. This is an area where a family conversation is a good idea. It may be that a child’s financial condition has changed over time, and they have different needs at the time of the parent’s death. This is a reminder to review your estate plans over time to be sure they fit your current situation.
What Should You Do?
As you can see, there are good reasons to treat children differently in estate planning. But each family is different and often these situations are emotionally charged. It pays to talk things through as a family and to consider your options carefully. It’s particularly important to keep all your children in the conversation as you consider your options. Many times, clarity about the parents wishes and priorities can go a long way to help children understand and accept the parents’ choices.
As I mentioned earlier. This situation will benefit from conversations with your professional advisors. A fiduciary financial planner and an estate attorney will both be very helpful as you sort through family priorities and evaluate your particular options. The more advice you get at the beginning of your estate planning process the better things will go.
If you are already working with a fiduciary, fee-first, CFP® professional to achieve your financial goals, that person is a great place to start the conversation about estate planning. They can help you make better estate planning decisions in the context of your other financial goals. And, fiduciary planners focus on a holistic financial plan driven by your goals and priorities and addressing all aspects of your financial life. With a big-picture approach, you will be better prepared to understand your options at every step along the way.
Yes, I am a CFP® professional. I’m always a fiduciary and I work on a fee basis. And yes, I’m still taking on a few great families to be part of my financial planning practice. If you would like to talk with my about how estate planning fits in your overall financial game plan, I would love to do that. Just follow this LINK to find a time for us to talk.
If this article has you thinking about your own circumstances, contact my office at firstname.lastname@example.org. I am always happy to meet with people who are working on their retirement plans. Dunncreek Advisors does not provide legal or tax advice, nor is this article intended to do so.