Avoiding Inheritance Conflict in Your Family

Presented by Tim Traub

You may have a will in place, but have you taken steps to ensure that your children won’t be left bickering over inheritances once you’ve passed away? In even the most close-knit clan, grief over a family member’s passing can bring tensions to the surface, especially when money is involved.

A typical scenario

Throughout their marriage, John and Jane Smith had kept a close eye on their finances. Working with their financial advisor, they’d saved and invested carefully over the years, and they planned to leave a sizable inheritance to their three children, Jack, Olivia, and Harry. Unfortunately, though they had prepared a will, John and Jane failed to outline exactly who would get what. They named Jack, the eldest child, as the beneficiary on their life insurance policy and other accounts, assuming he would divide up the funds equally. They left meaningful family jewelry to Olivia, because she was their lone daughter, and gave Harry all of their artwork, since he loved to paint.

Because the children had always been so close and gotten along so well, John and Jane figured they would split everything three ways and, if someone wanted a specific item, they’d work out an equitable arrangement. But things didn’t turn out as the Smiths had planned. Upon discovering that he was the sole legal beneficiary of his parents’ accounts, Jack decided to keep the money for himself, using it to pay for the vacation house he and his wife had long dreamed of buying. In his view, Olivia and Harry had received their fair share of the family estate and there was no need to split the money three ways. A family inheritance feud ensued, with Olivia and Harry vowing never to speak to Jack again.

Tips for keeping the peace

You may be thinking, “That would never happen to my family!” But situations like this are all too common. To help prevent inheritance conflict among your children, consider these suggestions:

·         Be realistic and communicate openly. Your children may be expecting a significant inheritance, one that could help them purchase a home, pay for their children’s education, or simply make them rich. To avoid disappointment, it’s important to give them a sense of where you stand financially and to emphasize that your finances may change, depending on medical expenses or other unexpected costs.

·         Keep your documents up to date. Be sure to update your will and beneficiary designations to reflect life events such as marriages, divorces, new grandchildren, and so on. Keeping your documents current will help ensure that you don’t unintentionally include someone who’s no longer part of your family or exclude someone you wish to benefit.

·         Address personal property specifically and separately. In addition to your will, leave a separate list of personal property with instructions detailing who should inherit each item. The list should describe each piece of property you wish to gift, leaving no room for interpretation.

·         Don’t task the oldest beneficiary with distributing your assets. It’s not wise to leave one child to handle the distribution of your assets, trusting he or she will do the right thing. If you want all of your children to inherit equally, put them all down as beneficiaries.

·         Give everyone a role. Dividing assets equally can help reduce conflict among heirs, but it’s important to think about the division of responsibilities as well. When you assign responsibility for handling your estate, you’re making a statement about whom you think is capable and trustworthy. Consider how your children will react and, if possible, assign everyone a role, even a small one, to play in the decision-making.

·         Explain yourself. What happens if you don’t want to split your assets equally among your children? Many parents consider this option if one child is financially successful while another is struggling. If you plan to distribute your assets unequally, write a personal note to accompany the will, explaining your reasoning. This may help reduce any resentment your heirs may feel.

·         Eliminate uncertainty with a trust. A common estate planning tool, a trust can help you manage and control the distribution of your assets in the event of your death. Through a trust, you can elect to distribute your assets in increments if you pass away before your children are mature enough to manage money wisely—for instance, one-third at age 25, another third at 30, and the final installment at age 35. You might also consider using a trust to hold a distribution until a later date if your child has financial problems or creditor concerns.

Protecting your legacy

Though the estate planning process involves many legal responsibilities, it’s important not to lose sight of the personal aspects. If you plan to leave an inheritance to your children, be sure to consider ways to reduce conflict once you’re gone. By carefully planning and setting expectations ahead of time, you’ll help protect the most valuable part of your legacy—your family.

This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Investors should consult a tax preparer, professional tax advisor, and/or lawyer.

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Tim Traub is a financial consultant located at Tim Traub, LLC 167 Cranberry Highway in Orleans, MA. He offers securities as a Registered Representative of Commonwealth Financial Network^®, Member FINRA/SIPC. He can be reached at (508) 240-0848 or at timtraub@timtraubllc.com.

© 2013 Commonwealth Financial Network^®

If you lived as a child in the 40's, 50's, 60's or 70's.

Looking back, it's hard to believe that we have lived as long as we have...

As children, we would ride in cars with no seat belts or air bags. Riding in the back of a pickup truck on a warm day was always a special treat.

Our baby cribs were covered with bright colored lead-based paint. We had no childproof lids on medicine bottles, doors, or cabinets, and when we rode our bikes, we had no helmets. (Not to mention hitchhiking to town as a young kid!)

We drank water from the garden hose and not from a bottle. Horrors.

We would spend hours building our go-carts out of scraps and then rode down the hill, only to find out we forgot the brakes. After running into the bushes a few times we learned to solve the problem.

We would leave home in the morning and play all day, as long as we were back when the street lights came on. No one was able to reach us all day.

No cell phones. Unthinkable. We played dodgeball and sometimes the ball would really hurt. We got cut and broke bones and broke teeth, and there were no law suits from these accidents. They were accidents. No one was to blame, but us. Remember accidents?

We had fights and punched each other and got black and blue and learned to get over it.

We ate cupcakes, bread and butter, and drank sugar soda but we were never overweight...we were always outside playing. We shared one grape soda with four friends, from one bottle and no one died from this.

We did not have Play stations, Nintendo 64, X-Boxes, video games at all, 199 channels on cable, video tape movies, surround sound, personal cell phones, Personal Computers, Internet chat rooms ... we had friends. We went outside and found them. We rode bikes or walked to a friend's home and knocked on the door, or rung the bell or just walked in and talked to them. Imagine such a thing. Without asking a parent! By ourselves! Out there in the cold cruel world! Without a guardian. How did we do it?

We made up games with sticks and tennis balls and ate worms and although

we were told it would happen, we did not put out very many eyes, nor did the

worms live inside us forever.

Little League had tryouts and not everyone made the team. Those who didn't, had to learn to deal with disappointment..... Some students weren't as smart as others so they failed a grade and were held back to repeat the same grade.....Horrors. Tests were not adjusted for any reason.

Our actions were our own. Consequences were expected. No one to hide behind. The idea of a parent bailing us out if we broke a law was unheard of. They actually sided with the law, imagine that!

This generation has produced some of the best risk-takers and problem solvers and inventors, ever. The past 50 years has been an explosion of innovation and new ideas. We had freedom, failure, success and responsibility, and we learned how to deal with it all.

And you're one of them. Congratulations!