Klitzman Law Group, PLLC

When Can Gifts or Donations Be Made for You?

“Many older adults enjoy giving money during their lifetime to family members or donations to a religious or charitable organizations.”

Grandparents may make a generous gift to a grandchild to help with college expenses or an adult child who is struggling. The size of the gifts is often directly related to the giver’s financial resources, life circumstances and their relationship with the recipient. However, this tendency toward generosity can come to a sudden stop if the giver becomes incapacitated, explains a recent article titled “Estate Planning: Gifts and donations by agents and trustees” from Lake County News.

Authority to make gifts can be included in a person’s trust to permit the trustee to make gifts using assets owned by the trust. A person’s power of attorney can be drafted to permit the agent to gift using assets owned by the individual if this gifting authority is expressly stated and authorized. It may not be implied based on a person’s past behavior or informal comments.

For example, a commonly used express giving provision in power of attorney is language like this: “The Agent is authorized to make gifts on the Principal’s behalf to the Principal’s children, any of their issue, or both, to the full extent of the federal annual gift tax exclusion…and for such purposes, to remove the Principal’s assets from any revocable trust of which the Principal is a grantor.”

This language, which must be created in alignment with state law, is an example of how the agent may be given discretion to make gifts to children and grandchildren, up to the annual federal gift tax exclusion per person. The agent may request assets from the principal’s trust to fulfill these gifts.

Giving should not be confused with a person’s legal duties of support to a spouse or dependent minor children. A Power of Attorney and a trust can be used to meet a person’s legal duty of support during the time of their incapacity.

Some people provide financial support to family members, which is not required by law.

For example, a parent may wish to pay a disabled child’s living expenses in coordination with any special needs planning. It’s extremely important in this situation for planning to be in place long before it is needed. If support is to continue when the parent becomes incapacitated, the parent’s estate planning documents must provide for continued support, otherwise the child will lose access to those resources.

An agent under a power of attorney and a trustee according to the directions of the trust document are both fiduciaries, meaning they are legal representatives with duties and obligations to put the interest of the individual ahead of their own.

Any action taken by the agent or the trustee must meet the standard of the fiduciary. The actions must be reasonable, in good faith and consistent with any instructions specified in the document. An agent or a trustee may not make imprudent or unjustified gifts which might jeopardize the financial welfare of the principal.

An important exception is if the agent or trustee is expressly authorized to gift assets in order to qualify the principal as eligible for needs-based government benefits.

There are many good reasons to make gifts during one’s lifetime. It is sometimess necessary for those gifts to continue during incapacity. Talk with an estate planning attorney to ensure that loved ones are protected regardless of what unexpected events should occur.

Reference: Lake County News (Dec. 31, 2022) “Estate Planning: Gifts and donations by agents and trustees”

What Happens When There Is No Will?

“Creating a will should be the first step in a comprehensive estate planning process, since it allows you to make sure that your wishes are properly carried out after your death.”

A will ensures that your personal and financial assets are given to the people and organizations you want. It also allows you to choose the person you want to settle your affairs, known as your executor. The time to have a will prepared is typically the same time people have a power of attorney and healthcare proxy forms prepared, according to the article “What Happens if You Die Without a Will?” from The Street.

Your estate plan is the term used to describe having all of these and other tools prepared to work together. It has nothing to do with the size of your estate, which could be modest or major. Regardless of the financial size or complexity of your life, you need a will.

What happens without a will?

A married person with children who dies without a will does the family a great disservice. All property, including real estate, investments and accounts that are jointly owned with the spouse go to the co-owner without needing to go through probate. However, separately owned property and accounts are distributed by the state in the absence of a will. Depending on the state, one-third may be awarded to the surviving spouse, and the remainder may be divided among the children. If the children are minors, the funds will be held in an account only accessible with court approval. The family may find itself without sufficient funds to maintain its lifestyle.

A person who is married but has no children or grandchildren and dies without a will may have their entire estate given to the surviving spouse. However, some states have a cap of $100,000. Other states give a third of to one-half of assets to the surviving spouse and the rest to the deceased’s parents, if they are living, or to the siblings. Jointly owned property, accounts and community property go to the surviving spouse.

What about a single person with children? With no will, the state law gives the decedent’s assets to surviving children in equal shares. If an adult child is deceased, their share is split among their own children (the decedent’s grandchildren). However, if the children are minors, the money is subject to court control and supervision.

If someone who is single and has no children dies, the state usually gives their assets to surviving parents. If the parents are not living, the assets will be distributed to the decedent’s siblings, or nephews and nieces, if the siblings have also passed. The state will reference a consanguinity chart—a chart used to help identify relationships of people showing degrees of family relationships by blood or marriage. Assets may pass to distant cousins who have never met or even known of the existence of the decedent.

If there are no living family members, the estate typically goes to the state itself.

When a member of an unmarried couple dies without a will, the surviving partner has no legal rights at all. Only spouses and relatives are recognized by state law. The partner will not inherit anything; assets will pass as if the person was single.

Domestic partners are treated differently in different states. In some states, they have inheritance rights, but this is state-dependent.

An experienced estate planning attorney can create a will and related documents to ensure your wishes are carried out upon your death. Otherwise, your estate will be distributed according to the laws of your state. You can protect yourself and your loved ones with a will.

Reference: The Street (Jan. 2, 2023) “What Happens if You Die Without a Will?”

How to Plan a Business Succession

“A frequent complaint by next-generation members is that the senior generation never fully lets go of business tasks.”

Winter is a slower season for farmers and ranchers. It offers family business leaders time to plan for the future. A recent article from Progressive Farmer, “Family Business Matters: Eight Practical Succession Ideas,” lists ideas to improve succession and estate planning efforts.

Update balance sheets. Families who own land passed through generations don’t always like to show the land at its current fair market value. Even if you intend to never sell the land, creating an estate plan requires an accurate valuation of all assets to minimize the consequences of estate and income taxes.

Chart ownership for the future. Family members often have no understanding of how they will achieve ownership of the business and its assets. Will it be a gift? Will there be taxes to pay? Or will it be a sale? Will they need to buy out non-farming family members? Without clear answers to these and related questions, people may find themselves operating on assumptions, which almost always leads to conflict or family fractures.

Start handing off management tasks sooner, not later. Plan for the transition by starting with discrete business functions. This could be as straightforward as making decisions about equipment, purchasing crop insurance, or enrolling in a Farm Service Agency. This gives the senior generation the ability to delegate and observe, while empowering and more fully engaging the next generation.

Refresh estate planning documents. People often neglect to update estate documents. Review wills, trusts, trustees, beneficiary designations, advance medical directives and power of attorney documents. Are the people named in various roles still appropriate? Does your estate still work, in light of changing tax laws? This should happen at least every three to five years.

Assess tax consequences of exiting the business. Part of retirement funding is the tax liability of leaving the family business. Deferred income, prepaid expenses and fully depreciated equipment can lead to significant tax exposure. Three to five years ahead of your departure, start mapping out a plan with your accountant, estate planning attorney and financial advisor.

Create a relationship between family members and landowners. If you rent property from an absentee landowner, those relationships will be vital to continuing the business. You may not be able to influence the landowner at the time of transition to the next generation. However, establishing relationships with family members who will take over for you can reduce friction.

Communicate the benefits family members will get from working together to maintain the business. Passing land from one generation to the next often means siblings or cousins become business partners, with undivided interests in the land or as shareholders or members of some legal entity. Family members who may not get along will benefit from having a “buy-sell agreement” in place. This spells out how partners can buy out each other’s interest if one or more family members want to sell. Talk with your estate planning attorney to establish an agreement in advance of anyone leaving the business to reduce the potential of family conflict.

Reference: Progressive Farmer (Jan. 1, 2023) “Family Business Matters: Eight Practical Succession Ideas”

High Interest Rates Have an Impact on Estate Planning

“When the 7520 rate is low—as it has been for 15 years—opportunities for good planning abound.  However, what about when the rate is high? Few estate planners have needed to ask themselves that question until very recently.”

The Section 7520 rate has been low for the past 15 years and presented many opportunities for good planning. What happens when inflation has returned and rates are moving up, asks a recent article titled “Estate Planning Techniques in a High—Interest—Rate Environment” from Bloomberg Tax.

The Section 7520 rate is the interest rate for a particular month as determined by the IRS. It is 120 percent of the applicable federal midterm rate (compounded annually) for the month in which the valuation date falls and rounded to the nearest two-tenths of a percent. It is used for actuarial planning, to discount the value of annuities, life estates and remainders to present value, and is revised monthly.

In January 2022, the 7520 rate was at 1.6%, but as interest rates increased, it shot up and in December 2022 was 5.2%. This was a 225% increase—unprecedented in the history of the 7520 rate. However, there are four key planning concepts which may make 2023 a little brighter for estate planning attorneys and their clients.

Higher inflation equals higher exemptions. Certain inflation adjusted exemptions and exclusions increased on January 1, 2023. The federal transfer tax exemption rose by $860,000 to $12.92 million, and the annual gift tax exclusion increased to $17,000 from $16,000 in 2022.

These increases give wealthy families the opportunity to make generous new gifts to family members without triggering any transfer taxes. Those who have fully used transfer tax exemptions may wish to consider making additional transfers.

Shift charitable giving to CRTs for higher interest rates. People who might have started Charitable Lead Trusts should instead look at Charitable Remainder Trusts. With both CLTs and CRTs, the value of the income and remainder interests are calculated using the 7520 rate. The key difference, for estate planning purposes, is the impact of a rising rate on the amount of the available charitable deduction.

The return of the QPRT. Qualified Personal Residence Trusts have been hibernating for years because of low interest rates. However, the time has come to return them to use for wealth transfer. A QPRT lets a person transfer a residence at a discounted value, while retaining the right to occupy the residence for a number of years. The 7520 rate is used to determine the value of the owner’s retained interest. The higher the rate, the more value retained by the owner and the smaller the amount of the taxable gift to the remainder beneficiaries, usually the owner’s children.

GRATs still have value. A Grantor Remainder Trust should still be considered in estate planning. A GRAT is more appealing in a low interest environment. However, a GRAT can still be useful when rates are rising. The success or failure of the GRAT usually depends on whether the assets transferred to the GRAT appreciate in value at a rate exceeding the 7520 rate, since the excess appreciation is transferred to the remainder beneficiaries gift tax-free. A GRAT can also be structured as a zeroed-out GRAT. This means that the transfer of assets to the GRAT doesn’t use any of the grantor’s transfer tax exemption or result in any gift tax due. This is still of value to a person who owns assets with significant growth potential, like securities likely to rebound quickly from depressed 2022 values.

Reference: Bloomberg Tax (Dec. 23, 2022) “Estate Planning Techniques in a High—Interest—Rate Environment”

How Does a Trust Work?

“There’s no single path for everyone to follow. However, you might consider establishing a trust, which offers some key benefits.”

You’ve worked hard to accumulate financial assets. You’ll need them to support your retirement. However, what if you also want to pass them on to loved ones? Trusts are used to pass assets to the next generation and have many benefits, says a recent article titled “Passing assets through a trust—What to know” from the Daily Bulldog.

“Funded” trusts don’t go through probate, which can be time-consuming, costly, and public. Your last will and testament becomes a public document when it is filed in the courthouse. Anyone can see it, from people wanting to sell your home to thieves looking for victims. Trust documents are not public, so no one outside of the grantor and the trustee knows what is in the trust and when distributions will be made. A trust also gives you the ability to be very specific about who will inherit assets in the trust, and when.

An estate planning attorney will help establish trusts, ensuring they are compliant with state law. There are three key questions to address during the trust creation process.

Who will serve as a trustee? There are several key roles in trusts. The person who creates the trust is the grantor of the trust. They name the trustee—the person or company charged with managing the trust’s assets and carrying out the instructions in the trust. You might choose a loved one. However, if they don’t have the knowledge or experience to manage the responsibilities, you could also name a corporate fiduciary, such as a bank or trust company. These entities charge for their services and usually require a minimum.

When will distributions be made? As the grantor, you get to decide when assets will be distributed and the amount of the distribution. You might want to keep the assets in the trust until the beneficiary reaches legal age. You could also structure the trust to make distributions at specific ages, i.e., at 30, 35 and 40. The trust could even hold the assets for the lifetime of the beneficiary and only distribute earned income. A large part of this decision has to do with how responsible you feel the beneficiaries will be with their inheritance.

What is the purpose of the trust? The grantor also gets to decide how trust assets should be used. The trust could designate broad categories, such as health, education, maintenance and support. The trust can be structured so the beneficiary needs to ask the trustee for a certain amount of assets. Other options are to structure the trust to provide mandatory income, once or twice a year, or tie distributions to incentives, such as finishing a college degree or purchasing a first home.

An estate planning attorney will explain the different types of trusts and which one is best for your unique situation. There are many different types of trusts. You’ll want to be sure to choose the right one to protect yourself and your loved ones.

Reference: Daily Bulldog (Dec. 24, 202) “Passing assets through a trust—What to know”

Beneficiary Mistakes to Avoid

“Before making a decision on a beneficiary, it's very important to check your state laws. Some states have different rules on who you can name as a beneficiary.”

Planning for one’s eventual death can be a somber task. However, consider what would occur if you failed to plan: loved ones trying to figure out your intentions, a long and expensive legal battle with unintended heirs and instead of grieving your loss, wondering why you didn’t take care of business while you were living. Planning suddenly becomes far more appealing, doesn’t it?

A recent article from yahoo! finance, “5 Retirement Plan Beneficiary Mistakes to Avoid,” explains how to avoid some of the issues regarding beneficiaries.

You haven’t named a beneficiary for your retirement accounts. This is a common estate planning mistake, even though it seems so obvious. A beneficiary can be a person, a charity, a trust, or your estate. Your estate planning attorney will be able to help you identify likely beneficiaries and ensure they are eligible.

You forgot to review your beneficiary designations for many years. Most people have changes in relationships as they move through the stages of life. The same person who was your best friend in your twenties might not even be in your life in your sixties. However, if you don’t check on beneficiary designations on a regular basis, you may be leaving your retirement accounts to people who haven’t heard from you in decades and disinheriting loved ones. Every time you update your estate plan, which should be every three to five years, check your beneficiary designations.

You didn’t name your spouse as a primary beneficiary for a retirement account. When Congress passed the 2019 SECURE Act, the bill removed a provision allowing non-spousal beneficiaries to stretch out disbursements from IRAs over their lifetimes, also known as the “Stretch IRA.” A non-spouse beneficiary must empty any inherited IRA within ten years from the death of the account holder. If a minor child is the beneficiary, once they reach the age of legal majority, they are required to follow the rules of a Required Minimum Distribution. Having a spouse named as beneficiary allows them to move the inherited IRA funds into their own IRA and take out assets as they wish.

You named an estate as a beneficiary. You can name your estate as a beneficiary. However, it creates a significant tangle for the family who has to set things right. For instance, if you have any debt, your estate could be attached by creditors. Your estate may also go through probate court, a court-supervised process to validate your will, have your final assets identified and have debts paid before any remaining assets are distributed to heirs.

You didn’t create a retirement plan until late in your career. Retirement seems very far away during your twenties, thirties and even forties. However, the years pass and suddenly you’re looking at retirement without enough money set aside. Creating an estate plan early in your working life shifts your focus, so you understand how important it is to have a retirement plan.

An experienced estate planning attorney can help square away your beneficiary designations as part of your overall estate plan. The best time to start? How about today?

Reference: yahoo! finance (Dec. 19, 2022) “5 Retirement Plan Beneficiary Mistakes to Avoid”

How Does Guardianship Work?

“If you haven't had any experience with guardianship for adults with dementia, it's likely you don't understand just how complex it is. You are not alone.”

For family members of the estimated 6.5 million dementia patients in the U.S., it is crucial to understand whether guardianship may be an option for their loved one. A recent article from Next Avenue titled “Thinking of Becoming a Guardian?” explains how the guardianship process works and what factors go into the decision-making process.

Guardianship is the position of being responsible for someone else. State courts usually appoint a guardian to make decisions for a person, if the court finds that person to be incapacitated or unable to make safe and reasonable decisions for themselves. People who are placed under guardianship, known as “wards,” often lose their independence in making financial, legal and health care decisions.

If full guardianship is awarded, the person cannot make decisions about whether they may vote, marry, where they live, or make their own end-of-life decisions.

Two tasks that are evaluated when considering guardianship are a person’s ability to manage personal finances and to take medications as prescribed.

The court may call on a geriatrician or psychiatrist to evaluate the person’s functional behavior, cognitive function, disabling conditions and ability to meet their essential needs.

There are benefits to guardianship for someone who is not able to care for themselves. It ideally creates a safety net for a person who cannot make informed decisions for themselves.

this, of course, assumes that the guardian is honest and accountable, which is not always the case. The inconsistencies plaguing the guardianship system include minimum standards for guardians, lack of regular independent reviews of the need for guardianship and lack of educational requirements for guardians.

Once guardianship is assigned, there is a tendency for the person to become lost when no follow-up is done. The very same person who lacks capacity to care for themselves is not going to be able to advocate for themselves, contact an attorney or access funds for court proceedings.

There is also a tendency to assign full guardianship for a person, rather than less restrictive alternatives.

There are alternatives, but they require planning and discussion. More than 40% of Americans have not discussed their wishes for end-of-life care with their loved ones, according to an article in the Journal of the American Geriatrics Society. Families should have a conversation at the first sign of memory loss or when preparing for retirement regarding wishes for end-of-life care and write them down as part of an Advanced Directive—also known as a Living Will and Health Care Power of Attorney—when preparing their estate plan.

Another important document, although not legally binding, is a “Value History,” where you share your values and beliefs as they may impact care choices.

Designate a Power of Attorney and list two or even three back-up candidates. This person will be responsible for financial, legal and personal matters, avoiding the need for guardianship.

Appointing a family member or friend as a guardian is the ideal solution. However, there are instances when the best person to be a guardian is not a family member, but a court-appointed outsider. This relieves the family of being the ones who need to inform a person suffering from dementia with the news of having to move into a nursing home facility or sifting through financial records to learn that the family home is in foreclosure. The family can focus on being supportive and loving, while the guardian deals with the sometimes harsh realities of the person’s life.

Speak with your estate planning attorney to learn about how guardianship works, and whether it may be the right move for your family.

Reference: Next Avenue (Dec. 23, 2022) “Thinking of Becoming a Guardian?”

How to Use Qualified Charitable Distributions in Estate Planning

“A qualified charitable distribution is a direct transfer of traditional IRA funds to a qualified charity.”

Assets held in Individual Retirement Accounts (IRAs) are unquestionably the best assets to gift to charity, since IRAs are loaded with taxes. One way to relieve this tax burden is by using the IRA for charitable giving during your lifetime, says a recent article, “Giving funds in IRAs to charity with QCDs,” from Investment News.

Most people who give to charity don’t receive the taxable benefit because they don’t itemize deductions. They instead use the higher standard deduction, which offers no extra tax deduction for charitable giving.

Older taxpayers are more likely to use the standard deduction, since taxpayers aged 65 and older receive an extra standard deduction. In 2022, the standard deduction for a married couple filing jointly when each of the spouses are 65 and older is $28,700. The exceptions are couples with large medical expenses or those who make large charitable gifts.

Here’s where the IRA for charitable giving comes in. IRAs normally may not be given to charity or anyone in the owner’s life (except in the case of divorce). There is one exception: giving IRAs to charity with a QCD.

The QCD is a direct transfer of traditional IRA funds to a qualified charity. The QCD is an exclusion from income, which reduces Adjusted Gross Income. AGI is the most significant number on the tax return because it determines the availability of many tax deductions, credits and other benefits. Lowering AGI with a QCD could also work to reduce “stealth” taxes–taxes on Social Security benefits or Medicare premium surcharges.

QCDs are limited to $100,000 per person, per year (not per IRA). They can also satisfy RMDs up to the $100,000, but only if the timing is right.

There are some limitations to discuss with your estate planning attorney. For instance, QCDs are only available to IRA owners who are 70 ½ or older. They can only be made once you turn age 70 ½, not anytime in the year you turn 70 ½. The difference matters.

QCDs are not available from 401(k) or other employer plans. They also aren’t allowed for gifts to Donor Advised Funds (DAFs) and private foundations, and they can’t be made from active SEP or SIMPLE IRAs, where contributions are still being made.

Appreciated stocks can also be gifted to qualified charities and itemized deductions taken for the fair market value of the stock, if it was held for more than one year. There’s no tax on appreciation, as there would be if the stock were sold instead of gifted.

There are some tax traps to consider, including the SECURE Act, which allows traditional IRAs to be made after age 70 ½. However, it pairs the provision with a poison pill. If the IRA deduction is taken in the same year as a QCD, or any year before the QCD, the QCD tax exclusion could be reduced or lost. This can be avoided by making Roth IRA contributions instead of tax-deductible IRA contributions after age 70 ½.

Speak with your estate planning attorney about whether using a QCD makes sense for your estate planning and tax situation.

Reference: Investment News (Dec. 9, 2022) “Giving funds in IRAs to charity with QCDs”

What Does a Last Will and Testament Do?

“A last will and testament is essential for every adult. It establishes one’s wishes for distributing their property, whether real or personal, after death.”

Your will is the foundation of an estate plan, used to instruct your executor on distributing property, naming a guardian for minor children, creating a legacy and ensuring that your beneficiaries receive what you want. The will can also serve to disinherit a family member, as explained in the recent article “Last will can both include and exclude heirs” from The Record-Courier.

The process of cutting someone out of a will is known as “disinheriting.” Hurt feelings and tension among family members are inevitable when someone is disinherited. However, if the goal is to avoid litigation between family members, an experienced estate planning attorney will be needed. It takes careful planning to avoid creating a will contest. Disinheriting adult children increases the likelihood of them contesting the validity of the will.

Laws concerning inheritance rights vary. In Nevada, for instance, unless there is a prenuptial agreement, you cannot completely disinherit a spouse. Even if your will attempts to disinherit a spouse, in some cases the law will actually override the instructions in the will or trust and award a portion of the estate, known as the elective share, to a surviving spouse. If this is a concern, check with your estate planning attorney.

Adult children can be disinherited. However, minor children are often protected against disinheritance.

Parents can be disinherited if they outlive the decedent, since they are not always legally entitled to a share of their children’s estate.

Extended relatives can also be disinherited. Some estate planning attorneys will conduct a search for missing heirs or beneficiaries while preparing an estate plan to be sure there are no unknown legal heirs who might make themselves known to a decedent’s surviving spouse or other heirs.

Estranged biological children can be disinherited. However, the last will and testament must be properly prepared.

The reasons for disinheritance very from estrangement to the decedent believing their family member is financially secure and doesn’t need the inheritance. It is not necessary for the last will and testament to explain the reason for the disinheritance. However, it is advised to use a disinheritance clause to ensure the heir or beneficiary is removed and will not inherit under the will.

To protect the integrity of the will, it is also advised to include a no-contest clause in the will. This is a provision expressing a directive to eliminate the share allocated to any beneficiary who takes action to contest the testator’s intents as expressed in the will.

The last will and testament is the person’s last communication with loved ones. There is no further opportunity for clarification once they have passed. This is why it’s so important to have a will and for the will to explicitly state the names of the beneficiaries and the names of any disinherited persons.

When you meet with your estate planning attorney to create or update your last will and testament, be prepared to tell them if there are any family members who you want to disinherit, so they can create a last will and testament and an estate plan designed to withstand challenges.

Reference: The Record-Courier (Dec. 17, 2022) “Last will can both include and exclude heirs”

Should Each Child Get Equal Inheritance?

“Equally sharing the wealth among the children isn’t always fair, such as when one sibling is the primary caretaker, or another is already wealthy.”

Every estate planning attorney has conversations with their clients about how adult children should inherit. While most people assume siblings should all inherit equally, in many situations, equal is not always appropriate. There are many situations where an equal inheritance might be unfair, says a recent article, “How Should Your Children Inherit? 4 Scenarios Where ‘Equal’ Is Not Appropriate,” from Kiplinger.

The Caretaker Child Lives With the Parent. When one of the children lives with the parent and has taken on most, if not all, of the responsibilities, it may be fair to treat the child differently than siblings who are not involved with the parent’s care. Taking care of paying bills, coordinating health care appointments, driving the parent to appointments and being involved with end-of-life care is a lot of responsibility. It may be fair to leave this child the family home or leave the home to a trust for the child for their lifetime. The parent may wish to leave the caretaking child a larger portion of the inheritance to recognize the additional help they provided.

A Special Needs Child. If the parent has been the primary caregiver for a special needs child, the estate plan must take this into consideration to ensure the child will be properly cared for after the parents die or are unable to care for the child. Depending on what government benefits the child receives, this usually means the parents need to have a Special Needs Trust or Supplemental Needs Trust created. Most government benefits are means-tested. To remain eligible, recipients may not have more than a certain amount of personal assets. The Special Needs or Supplemental Needs trust could receive more or less than an equal amount of the estate the child would have inherited.

In this scenario, siblings are generally understanding. The siblings often know they will be the ones caring for the family member with special needs when the parents can no longer provide care and welcome the help of an elder law estate planning attorney to plan for their sibling’s future.

An Adult Child With Problems. It’s usually not a good idea to leave an equal portion of an inheritance to an adult child who suffers from mental illness, substance abuse, is going through a divorce or has a life-long history of making bad choices. Putting the money into a trust with a non-family member serving as a trustee and strict directions for when and how much money may be distributed may be a better option. In some cases, disinheriting a child is the unpleasant but only realistic alternative.

Wealth Disparities Among the Siblings. When one child has been financially successful and another struggles, it’s fair to bequeath different amounts. However, wealth can change over a lifetime, so review the estate plan and the wealth distribution on a regular basis.

How To Decide What Will Work For Your Family? Every family is different, and every family has different dynamics. Have open and honest discussions with your estate planning attorney, so they can help you plan for your family’s situation. If possible, the same frank discussion should take place with adult children, so no one is taken by surprise at a time when they will be grieving a loss.

Reference: Kiplinger (Dec. 18, 2022) “How Should Your Children Inherit? 4 Scenarios Where ‘Equal’ Is Not Appropriate”