18 Recommendations for Minimizing Inheritance Conflict
by Mark Accettura
You worked hard to build your nest egg. You saved, invested wisely and were careful to manage the myriad of risks that threatened your life’s savings. Having invested so much time, effort and sacrifice into getting where you are, it only makes sense that you would like to pass your life’s work on to your loved ones with the least amount of tax and government interference.
There are well-established tools to ensure that your financial legacy reaches the intended recipients. Wills, revocable trusts, irrevocable trusts, family limited partnerships (and LLCs), private foundations, and an alphabet soup of strategies—like GRITs, GRATs, CRUTs, CRTs, and QPRTs, to name a few—make estate transition efficient and tax free for all but the truly wealthy, and therefore are an indispensable part of a secure financial plan.
In this article
- Your Most Valuable Asset
- Anticipating and Avoiding Conflict
- Actions That Can Reduce Conflict
- Conclusion
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Your Most Valuable Asset
But this article is not about current estate-planning strategies. Although an important subject, and one that occupies the estate planning community and the clients we serve, I want to talk about your most valuable and enduring asset, the asset that for better or worse survives you and impacts generations to come: family.
Family is truly the gift that keeps on giving. The family dynamic that you had a hand in creating will survive you, impacting your children and grandchildren. Although many of the events that went into forming your family as it now exists have already occurred, your family is not set in stone. How you live your life from this point forward and how you structure your estate at death are new opportunities to reinforce the healthy aspects of your family, correct past wrongs, and leave a lasting legacy of fairness, compassion and love.
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Discussion
Excellent outline for minimizing conflict.This topic is generally avoided because one does not want to think of the inevitable.Family peace can be maintained ,why leave a legacy of a fractured family.
posted 11 months ago by Alfred from New Jersey
It is important to use a prenuptial for a second marriage. Be certain to define what assets existed at the end of the divorce and clearly state how new assets that accumulate during the second marriage are to be owned between yourself and the new spouse. Then the new trust documents for yourself and the new spouse pretty much write themselves as far as what goes to whose beneficiaries.
As far as IRA's and 401k's go, I set up the beneficiaries consistent with when the assets began to accumulate, i.e., new spouse gets her share for anything accumulated after the second marriage, but the trust for my natural children get what was accumulated before the second marriage.
The vacation home issue is one that I have not been able to resolve yet. It is a significant portion of my assets for my natural children, but none of them want the responsibility to maintain it. At the moment a bank trust division has it listed as to be managed for a fee with the value of the home being equally owned by the natural children. This is a potential source of conflict as some of the children will want to use it, others might want it sold for the money!?
posted 11 months ago by Errol from Utah
The author forgets the needs of couples without sufficient assets to comfortably carry the surviving spouse through his of her remaining lifetime. Given that the survivor will lose at least one SSI (income) but will be left with the same rent, mortgage, real estate taxes, personal health costs etc. the splitting off of assets to children and starving the surviving spouse regardless of the number of prior marriages, is unreal - in my opinion.
posted 11 months ago by Stephen from New Hampshire
I think it is better to tell your children what is in your will so they will know what to expect upon your death. This will avoid conflict among the children as they can discuss what they might consider unfair in the will. I also think it is a good to ask each child if there is any of your personal items they would like so as there distribution can discussed in an open fashion before being stated in the will.
posted 11 months ago by Michael from Maryland
There is one issue not addressed here. If a family trust is anticipated to be long-standing then there is the burden of IRS reporting requirements upon the trustees. Especially if the fiduciary trustees are all family members. If not filed on a timely basis there will be consequences with the IRS and the complicated nature of taxable trust reporting is quite onerous.
posted 11 months ago by James from Maryland
The article for me would have been more helpful defining the acronyms listed in the second paragraph and describing how they are appropriate given one's specific set of circumstances. There is good information here but it reads more like a psychological template for being fair to all of the family. People ought to be able to figure that out for themselves whereas selecting the best strategy based on your specific financial position or assets is much more difficult for the majority of people.
posted 11 months ago by Steven from Colorado
I agree that less relationship oriented opinion in exchange for more strategic or tax related guidance would have been a good thing
posted 11 months ago by Robert from Tennessee
How can I be certain I have selected the best Firm to act as Trustee for my childrens Trust?I have heard of too many people who have had their Trusts eroded by enormous fees charged by banks and also large firms like Merrill Lynch?
posted 11 months ago by Barbara from Florida
Nice article. I have a family trust, but have never made a list of specific objects and directed who should get them. I'm gonna do that.
posted 11 months ago by Alan from California
Nice article. I have a family trust, but have never made a list of specific objects and directed who should get them. I'm gonna do that.
posted 11 months ago by Alan from California
Excellent. I plan to discuss with my Estate Attorney.
I do not believe personal property was covered well enough. If you gift items of $100 to son #1 and items $500 to son #2, to keep things even, you need to say that the difference will be covered with other assets such as cash.
posted 11 months ago by Jim from Maryland
Having practiced probate and estate law for over 30 years before retirement I agree with most of your suggestions. However, the idea of appointing co-fiduciaries or a committee as fiduciaries is an invitation to disaster. If the sibilings can't get along when one is appointed having co-fiduciaries, particularly and even number, will only create insurmountable problems.
posted 11 months ago by Harold from Colorado
Barbara - here's a link to an AAII article on selecting a trustee for an estate plan; it includes a checklist:
http://www.aaii.com/journal/article/2-what-to-look-for-when-selecting-a-trustee-for-your-estate-plan
--Jean from AAII
posted 11 months ago by Loading... from
Since the author states up front that this is NOT an article about estate planning strategies, why criticize him for that? I have read many, many articles dealing with the legal/financial issues. This is the first I've seen that really delves into the human issues behind the merely pragmatic. And even though I've given thought to the emotional and psychological aspects of estate planning, I found several additional,and very helpful, points to consider. Excellent article!
posted 11 months ago by Caryl from California
Regarding the decisions about apporting assets among adult children (beneficiaries), there are several consideratikons:
relative wealth of each beneficiary; age of each beneficiary, as a guide to life expectancy; other sources of income, if any, available to each beneficiary such as working spouse or likely inheritance and amount from spouse's parents;support and help rendered during lifetime, especially later years; # of young children and their ages for each beneficiary; relative need among beneficiaries to maintain a reasonable standard of living;and so on.
I do not think the equal share concept is valid, even if the goal is to maintain family harmony; since often the beneficiaries are adult children they should be able to restrain their greed and envy,and respect the decisions of the deceased trust owner(s,proably their parents and/or grandparents.
posted 11 months ago by James from Tennessee
I am wondering how complicated it would be if I left my investment holdings to my four childred. Would it be possible or advisable to put them with an Investment Officer that is associated with the same bank where my Trust is located. Then they would have an income for the rest of their lives, instead of taking the cash when my estate is setttled.
posted 10 months ago by Ira from Arizona
1. If you must appoint a bank as trustee then give the heirs an easy way to fire & replace the trustee - had to do it twice! Otherwise they'll fee the estate to death.
2. Both my wife's and my adult children have copies of our documents, wills. POA's, Living Trusts, etc. That way they can complain while we're alive. They don't, however, have listings of the value of the estates.
3. Second marriage with signifcant age disparity poses difficulty planning problems that I haven't seen addressed anywhere at all well.
4. My parents explained to me and my siblings at young ages that what was theirs was theirs and we ought not expect to inherit anything. That understanding early-on provided significent incentive to us to do well.
posted 10 months ago by Evans from Georgia
I wish I had this article available when my father passed away a couple of years ago. ALl went well until the last week of my father's life, when relatives took advantage of my father's ailments and my working a continent away to change all that had been planned for years. Presenting this article to all those who participated in the unraveling might have defused a lot of the still-ongoing strife we are all having to tolerate and resolve.
posted 10 months ago by Roger from Maryland
I would be interested in getting tips to leave an estate to siblings, -- one of whom is very close to me, and two others.
I am a widow with no children.
posted 3 months ago by Irene Grbich from Florida
After going through this when my dad died recently. When he was alive he played favorites, but he divided his estate equally between us and we all appreciated that. I believe that equal is better, rather than perpetuating the mistakes of the past.
posted 3 months ago by David Westrate from Wisconsin
