If you are a parent, your primary motivation for creating an estate plan is to ensure that your estate passes to your children when you are gone. Exactly how your estate assets are distributed, however, can be the source of much internal debate. One question you may wrestle with is whether you should split your estate equally among your children. Many parents feel obligated to create an equal split in their estate plan, despite having reservations about whether that is really the best idea. Ultimately, the decision is yours to make; however, the Los Angeles estate planning attorneys at Collins Law Firm offer guidance when making that decision.
Why Would You Not Want to Distribute Your Estate Equally?
When your children are minors, deciding how to distribute your estate is not a real concern given that a minor cannot inherit directly from your estate. Instead, you will likely just create a trust and let the trust protect all assets while the children are minors. If the trust has assets left when the children reach adulthood, those assets are split equally among the children unless you direct otherwise. Why might you not want your assets split evenly among your children? There are several reasons why a parent might have legitimate concerns about gifting assets to an adult child, including:
- Addiction. As a parent you probably don’t want to admit that your child has a serious addiction; however, if you have an adult child with a drug, alcohol, gambling, or other addiction, it is imperative that you acknowledge the problem when making estate planning decisions because failing to do so could have disastrous consequences, both for the inheritance you leave that child and for your child.
- The in-law threat. If your adult child marries, you gain a son-in-law or daughter-in-law. The moment the ink is dry on the marriage certificate, your new in-law becomes a potential threat to your assets. Anything you gift to your child could be lost in a subsequent divorce or because of mismanagement by the spouse, giving you cause to be concerned about gifting assets to your child.
- Mental health issues. Managing an inheritance may be asking too much of an adult child who struggles with mental health issues. Again, you must be honest with yourself when evaluating your child’s ability to handle an inheritance. In addition, if your child has special needs, receiving an inheritance could jeopardize his/her eligibility for much-needed state and federal assistance programs such as Medicaid and SSI.
- The family spendthrift. You can find one in almost every family, that one family member who simply isn’t good with money no matter how much effort you put into teaching him/her money management skills.
Estate Planning Alternatives that May Help
For a parent, it can be heart-wrenching to think about disinheriting a child. It can be just as upsetting to feel as though the only way you can protect your hard-earned assets will make one of your children feel left out. Fortunately, there are estate planning strategies and tools that may be able to help if you are struggling with the issue of equal gifting
Using different methods to distribute the gifts is one way to gift equally but not in the same way. By way of illustration, if you are concerned that a beneficiary will squander a lump sum that is gifted directly, using a trust to distribute that individual’s inheritance (instead of gifting it directly in your Will) can drastically reduce that concern. A trust allows you to retain a certain degree of control over the assets gifted even after you are gone. A Trustee, appointed by you, manages the assets and distributes them according to terms that are also created by you. This allows you to direct small distributions on a monthly or yearly basis, thereby reducing the possibility that the entire inheritance will be blown in a short period of time. Moreover, you have the ability, as the Settlor, to decide what the trust assets can be used for if you are concerned about how they will be used by the beneficiary.
Contact Los Angeles Estate Planning Attorneys
For more information, please download our FREE estate planning worksheet. If you have additional questions or concerns about how to divide your estate among your children, be sure to consult with an experienced Los Angeles estate planning attorney. Contact the Collins Law Firm by calling (310) 677-9787 to register for one of our FREE estate planning workshops.