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Deciding How to Divide an Estate Among Family

Posted on: May 25th, 2015
estate distributionWhen structuring one’s estate, how does an individual decide how much to bequeath to a spouse, children, or other family members? Equally dividing an estate might seem like the most diplomatic and fair avenue for avoiding family conflict. Predicting the value of one’s estate at death could be a challenge for some individuals. Unexpected costs in retirement or long-term care expenses could tap into reserves intended to pass to the next generation. Planning in advance combined with the use of asset protection tools can help to transfer a legacy effectively.

Wealth is not the only item to address when planning. An individual might want to preserve one’s personal values as well. Leaving personal values in a will helps to encourage beneficiaries to appreciate what the decedent viewed as their legacy. This can be accomplished through letters of wishes or trust provisions. Financial assets, valuable collections, or sentimental items can be held in trust with specific provisions for the maintenance and distribution of assets. For example, some clients establish a trust that provides that the beneficiary may only make distributions for their education or the enjoyment of cultural events.

Fairness in estate distribution might brew conflict. If not planned for properly, state intestacy laws will determine the amounts and the individuals who are legally entitled to a decedent’s assets. When a testator does plan in advance, they might elect to divide assets disproportionately. This generally creates conflict among surviving family members. One way to help diffuse jealousy or misunderstanding is by the testator communicating with family members throughout their lifetimes so that they have realistic expectations of how much they will receive. 

A testator might decide to leave a larger inheritance to one child who is more financially responsible than another. However, the testator could still evenly distribute between the two children and protect assets from being squandered. Spendthrift provisions in a trust provide specific instructions to the beneficiary for how and when distributions may be made. Provisions might be included so the trust assets are only used to fund healthcare or education.

Some families are concerned the next generation will not appreciate or responsibly plan for their own retirement. With a growing trend of individuals expecting to rely on an inheritance to fund their retirement, future generations might lack respect for finances. In addition to limiting surprises and keeping family informed about how much they will likely receive, testators should also emphasize financial responsibilities through personal discussions as well as their letters of wishes.
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