The murkiest part
of estate planning is to discuss when and how to distribute your assets to your
heirs. This process requires a series of considerations and trade-offs to avoid
emotion-laden family problems.
For many, focusing
on numbers is objective and straightforward. But when it comes to this
final set of issues, things get gray because emotional factors drive decisions
now. There is no correct answer on how to distribute your estate.
Use this list of
questions to help frame your thinking:
- How
much would you like to give to charity, and how much to your family?
- Will
you divide your assets equally among your heirs, or on some other basis; for
example, on the basis of need or good behavior? What behavior do you want to
reward?
- What
form does your estate take, cash, securities, or other assets, given outright or
in trust? Can your heirs handle the responsibility of managing their own
finances, or will they need help? If you use a trust, what are the provisions?
How long does the trust last? And who is the trustee?
- Will
you make current gifts or bequests? Are your assets of a size that moving them
out of your taxable estate, during your lifetime, will reduce your ultimate
estate and gift tax bill? Do you enjoy seeing the effects of your gifts during
your lifetime?
- How will you handle gifts of tangibles (art, jewelry, or furniture)?
Are there items of particular sentimental value to particular heirs? Are
there items that your heirs might find particularly burdensome to use or
dispose of?
- How and when will you communicate your plans to your heirs? Are
there any legally required or advised disclosures? What kinds of
communications will best support your family relationships?
It’s Up to You
As you work through
these decisions, remember that your assets are yours, and you are free to
dispose of them as you see fit. While you can control what and how you give, you
cannot control the reactions of the recipients, how they treat the assets, or
how they treat each other.
Gifting equally to
heirs, for example, may seem fair – or it may cause the richer heirs to feel
guilty, and the poorer ones to feel resentful. All you can do is try to lay
the groundwork for healthy family relationships.
Finally, as with
most aspects of the estate-planning process, the decision on when and what to
communicate to heirs involves trade-offs that depend on individual personal
circumstances.
For some heirs,
knowledge of a future inheritance may act as a disincentive to provide for
themselves or create expectations that may conflict with your final decisions.
In other cases, heirs who are responsible and mature can and should be brought
into the process early on.
Making decisions
about the disposition of your assets can be an emotionally fraught and
time-consuming process. Take small steps and seek expert guidance to realize
your plans for the financial care of your families.
