Don’t Let Your Family Fall Apart After You’re Gone

We invest time in our families trying to ensure that our children and grandchildren live healthy, prosperous, and loving lives, long after we’re gone. But that is not always how it turns out. Death can bring out the worst in families.

This article is the fifth and final installment in our series about managing intergenerational wealth. The focus here is on finding ways to make sure that our money and our legacy do not leave our family in turmoil.

When under stress after the death of a parent, grown children can act like little children – temper tantrums, petty jealousies and all. Old grievances between siblings can become new again. As Tommy Smothers used to say in the 1960s TV comedy he hosted with his brother, “Mom always liked you best.”

Proper planning – and most of all, communicating our wishes outright – can help prevent families from breaking apart. The bottom line is: don’t leave it to chance. You must be pro-active to prevent in-fighting. Here are several important things you can do now.

Communicate. Communicate. Communicate.

Start with communication. Begin by having a series of honest, open conversations with your adult children so you can explain what you want to happen with your money, your home, and your possessions. After getting past the initial awkwardness, these talks can go surprisingly smoothly in many families. The idea is to convey what they should expect, so there is no shock or conflict after you’re gone. Your conversation does not have to include exact dollar figures, but rather your intent in divvying up your estate. Don’t leave them guessing. And don’t wait. Even though you may want to avoid the conversation, illness, incapacity, or even death can happen at any time.

Maintain an Updated Will

It is critical to have a well thought out, properly written will. The will should be as detailed as possible, directing to whom and when you want everything distributed. Include everything from your money and assets (financial and non-financial), to family photos and grandma’s china set. Also, don’t forget to include your digital assets, such as your social media and iTunes accounts. Creating a will requires forethought, self-awareness, and common sense. Without that document, you have relinquished control and created a free-for-all that could very likely lead to family conflict and tension.

Create a Sound Estate Plan

How you structure your estate could reinforce the healthy aspects of your family, according to the American Association of Individual Investors, while also correcting past wrongs and leaving a lasting legacy of fairness, compassion, and love. The group also notes that “unlike fights or misunderstandings during life, we cannot take back or fix the insensitivities, oversights, or hurtful provisions of our estate plan.”
There are also many grey areas people encounter along the way.

Deciding Who Gets What

The easiest and most common way to divide your estate is to give all children equal shares. But easy is not always equitable and not always what you want. There are plenty of situations that may warrant slicing the pie in unequal portions:

  • One child has assumed the burden of being your primary caregiver as you aged and became infirmed. Do they deserve more for what they have sacrificed?
  • One child has struck it rich on his/her own. Should they get less than the child who became a school teacher?
  • One child has taken over for you in running the family business. Should he/she inherit the whole thing, and if not, how do you divide that asset?
  • If you have a blended family, do step-children get a full share?
  • What happens to your home (primary and vacation homes) if one child wants to keep it and another wishes to sell it?
  • If a child has a drug or gambling addiction, how much of the pie do you give them if you worry that the money will be used to feed their addiction?
  • What do you do if you want to leave an inheritance to your child, but not their spouse?

So how do you deal with these difficult scenarios? There are strategies to address each challenge, but none of them are one-size-fits-all solutions. You should speak with a certified financial planner or estate planning attorney before making any final decisions.

Possible Solutions

Here are a few suggestions for consideration. But remember, each one requires that you make determinations based on all of the facts and emotions at hand. You must also be prepared to explain your thought process to everyone if you want to avoid tension later.

  • The Caregiver. You may want to reward the child who cared for you in your time of need for all their time and effort. It’s even possible that individual sacrificed a career move to remain available.
  • The Family Business Leader. If a family business is involved, you may want to give the majority interest to the child now running it, but set up a trust-owned life insurance policy to equalize the inheritance of the others.
  • The Child in Trouble. For the child who may not be able to manage your money responsibly, you can set up a trust that is administered by a neutral outsider and spreads the distribution of the money over several decades (or any amount of time you desire).
  • The Spouse. There are strategies you can employ to control how much of an inheritance a spouse can spend, ensuring there is money left over for children. One example is a QTIP trust, which gives a spouse access to the income produced by the trust, but requires an independent trustee to approve distributions from the principal, thus preserving the inheritance for the next generation.

If you are still concerned things will turn ugly, consider adding a “no-contest” (or “non-contestability”) clause to your will. This provision states any beneficiary who contests the will automatically loses his or her portion of the inheritance. It increases the likelihood that heirs will accept your will without a fight, and saves them a fortune in legal fees, which only serves to dilute the value of your estate.

Attorney Michael Goodman, an expert in estate planning and the transfer of family assets in Lawrenceville, N.J., recalls representing a woman who wanted to leave jewelry and other valuables to her many grandchildren. But she wasn’t specific about who gets what. The family argued for several years and is now fighting to terminate a trust also created by their grandmother. “I’ve told them that I’m tired of taking their money and continue encouraging them to reach an agreement before it is all gone,” Goodman says. He points out that this is a common occurrence that not only fuels family strife but is unnecessarily costly to the estate while heirs fight out the details.

You are in the best position now – while alive and of sound mind – to formulate a plan that will hopefully diffuse family conflict and future fights.

Read the rest of our series on Managing Intergenerational Family Wealth:

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