$30 trillion will be left for millennial offspring over the next few decades according to the consulting firm Accenture. If you’re a boomer parent who wants to leave your children, dependent or non-dependent, an inheritance then some planning must take place.
Manage Their Expectations
One study found that on average adult children underestimate their parents’ estate by a whopping $100,000. It’s important that your children, both dependent and non-dependent, have an understanding of where you stand financially. This does not mean you have to spend hours pouring over your financial life with your children, but your kids should have a basic sense of what will happen to them financially if you pass away. You should also let your kids know that your financial situation is subject to change, if for example more money needs to be allotted for medical care or if a job is lost. Your kids should also know whom they should contact in the case of your death and where you keep the important documents that they will need in order to receive their inheritance.
Level The Playing Field
If you want to minimize the arguments over your estate then leave it as equally as possible. This applies to not only your assets but the responsibilities required to settling your affairs as well. Remember that when you give your kids responsibility you’re sending them a message as to who is capable and worthy, as well as whom you trust. This is your final statement, which of course is irrevocable so you want to be aware of your children’s feelings. If you have more than one child that has any amount of capability for handling your affairs you should at least designate them a small role.
Distribute the Inheritance Yourself
Handing out a $200,000 life insurance policy to your oldest child and trusting him or her to divvy it out equally among his or her siblings is a big mistake. If you want all your kids to inherit the same amount of money then put them all down as beneficiaries. If you are in possession of art, jewelry or other valuable items then leave a list of who gets what along with your wishes for how to divide whatever is left. The last thing you want is a family feud over your possessions so always have fairness in mind when doing this process.
If You Must Distribute Unequally Then Explain Your Actions
You may have a reason for distributing your assets unequally, for example if a child earns less of an income then another and therefore needs more. However, this can still cause resentment and so many people tend to avoid talking to their children about their inheritances in the first place. At the very least you should write a letter to go along with the will so that your children understand you love them all equally, and that you are distributing your assets a certain way for a specific reason.
Use a Trust
If you want to ensure that your kids use their inheritance money wisely, consider putting it into a trust, and so that way you can include a few strings. Many attorneys recommend that you distribute inheritances into chunks, for example, one-third at age 20, one-third at age 30 and one-third at age 40. This allows for your children to mature and come to a better financial decision on how to spend the inheritance then if they were say seventeen. You may also want to include provisions that prevent your children from inheriting the money if they are going through any sort of substance problem or getting into trouble with the law.
