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Consider whether your children should get different legacies

On Behalf of | Jul 22, 2020 | Trusts |

One of the main decisions in estate planning is what to leave to your children. Many Coloradans know almost automatically that they just want to split things equally. But even that is sometimes more complex than you might think.

Potential for sibling dissension

For example, say that $300,000 of your estate represents the value of a cabin in the mountains. Maybe one of your three kids loves that cabin and goes there often, but the others have no interest in it.

If you left broad, nonspecific instructions in your will to split the estate three equal ways, would the three children be able to agree to give that child the second home as part of their share? What if the estate is worth less than $900,000, so that if one child got the cabin, the rest split equally would give the other two less value than the one getting the cabin? Would they accept an offer from the one getting the second home to pay them enough money to equalize the inheritances? Or, would the personal representative of your estate need to sell it and use the proceeds to equalize the bequests in a three-way cash division?

You can see the opportunity for conflict in a scenario like this. To prevent dissent, you could write a will that would direct exactly how large assets would be passed along and you could decide how to split the overall value.

Unequal distributions among siblings

It can also be a challenge when an equal distribution among siblings is not the best fit for your family. For example, if one of your kids has disabilities, your lawyer may suggest setting up a special needs trust to protect their eligibility for public benefits rather than leaving them money or assets outright. Or, if another child has trouble controlling their spending, has a serious addiction or is still a minor, other kinds of trusts to restrict their free access to money may be a good choice.

You may prefer an unequal division if one child has accumulated wealth themselves, but others have financial challenges. Potentially most difficult, you might want to disinherit one of your kids because of a falling out or another personal reason.

Variations in vehicles for giving

Another idea is the use of gifts while you are still alive, especially if one of your children has an immediate need for help. Maybe you give some personal property, real estate, investments or money to one or some of your kids during your lifetime and equalize things out through your will or the use of trusts. You can also use payable-on-death accounts by designating one or more kids as beneficiaries, such as with a life insurance policy or retirement account.

Finally, it is probably smart to consider talking to your children about these issues while you are alive and explaining your reasoning to help them to understand. Another option would be to include language in your will or even in a letter that you keep with it that sheds light on your motivations. These can be ways to help prevent future conflict among them or stave off hurt feelings.

This is an introduction to some of the many issues that can come up in estate planning when you have more than one child. An experienced estate planning lawyer can have a comprehensive discussion with you about your circumstances and goals and offer alternatives for resolving these kinds of issues.