Company News

Trusts & Inheritance

on August 18, 2015

We shout at referees.  We keep scores and tallies.  We lobby both our parents and the legislature in varying and sometimes equal measures.  From fluorescently lit fields to classrooms infused with chalk dust, we all have a vested interest in fairness.  It is the backbone of any long-lived civilization, and the hotly contested topic of any thriving modern society.

grandpa daughter walkingWhen it comes to questions about inheritance, many parents will answer with two words: “Divide equally.”  And while these words might seem to embody fairness in a distribution of inheritance, the reality is that it may leave far more questions than it does answers – and when it comes to an estate plan, questions lead to time spent in court.

What does it mean to divide equally?  This is a simple question with a deceptively complex answer.  While it seems simple enough to say “three children, each get a third,” doing so without thinking about the consequences, can lead to problems down the line.  What if, in a case where your kids have equal shares in the family home, one of them decides to sell off his portion?  What if a majority of them decide to evict the one child living there?  What happens to personal property which cannot be divided, such as cars or jewelry?  In the latter case, the trustee of the trust will have the power to distribute personal items according to a roughly equal value, but wouldn’t it be better if instructions were left to guide the trustee?  Wouldn’t it be better if instructions were left regarding what to do with your home?

This is not to say that every estate plan has to be divided “equally,” or “fairly.”  In fact, many times it’s better that it isn’t.  Some kids will not need the money and possessions – in some more uncommon scenarios, they won’t even want it.  Sometimes one child will need more help than another, whether because of financial straits, a disability or because of some unforeseen event.  “Fairness” can take on an entire new meaning when, between two children, one gets into an accident and is left paralyzed from the waist down.  In fact, at a certain point, “fairness” can become an entirely inappropriate standard for guiding our actions.

Implicit parental obligations aside, it is important to keep in mind that the inheritance is a gift.  It is a gratuity, something which should neither be expected nor fought over.  Of all the things to emphasize in an open discussion with one’s children, this is likely the most important.  Your money is yours – not your children’s, and not your relatives’.  Any inheritance they receive is not given in order to fulfill a parental duty, or even out of fairness, but out of the love and care we naturally give to those whom we care about.

The primary purpose of an estate plan is harmonious relations.  Trusts serve a vital role in safeguarding relationships between family members by preventing disputes over inheritance; the more specific trust instructions are, the fewer questions are left for one’s beneficiaries.

Start a conversation.  Discuss your plans and wishes with your children, and let them be a part of the process so that, when the time comes, there will be nothing left to worry about.

If you have any questions, our office is available at (808) 942-8778.

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