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Archive for July 2016

Treating Your Family Fairly In Your Estate Plan

Treating Your Children Fairly (But Not Necessarily Equally) In Your Estate Plan

Most parents want to treat their children fairly in their estate planning, and many assume that means having their children inherit equally. But fair does not necessarily mean equal. There may be special circumstances to consider before you divide the family pie into equal parts. For example:

  • Treat Your Family Fairly During Estate PlanningYou may want to leave more to your son who struggles to support his family on a modest teacher’s salary than to your daughter who is a successful professional, married well and has chosen not to have children.
  • You may want to conpensate a child who has given up part of his/her own life to care for you.
  • You may have a much younger child who will need care longer than your older children.
  • You may have a special needs child who will need care for his/her lifetime.
  • You may have one child who has joined the family business and other children who have not. Instead of making them all equal owners in the business, you may want to leave the business to the one who has shown an interest and compensate the others with other assets and/or life insurance.

Distribution of Their Inheritances May Also Vary

Not only do you need to decide how much  each should receive, but also when  they will receive it–and that can be different for each one, too. You can distribute their inheritances in one lump sum or in installments, or you can keep an inheritance in a trust. Consider how much the inheritance is, their ages and family situation, how they have handled their own money, and how much they need your money. For example:

  • If your children are already older (say, in their 60s) and they have shown some responsiblity with their own money, they you may be fine with them inheriting a lump sum.
  • If you have an adult child who is struggling to buy a home, then you may want to provide a distribution immediately upon your death and distribute the rest later.
  • If your children are younger adults, you may want them to inherit in installments to give them several chances to become responsible with money.

Benefits of Keeping Inheritances in a Trust

These days, many parents do not distribute inheritances at all and decide to keep the money in a trust for their children. Your trustee can make periodic distributions based on guidelines you provide, but assets that stay in the trust are protected from irresponsible spending, creditors (bankruptcy and divorce), and predators (those with undue influence on your child).  Circumstances that might warrant this:

  • You have a child who is irresponsible with money or has dependency issues.
  • You are concerned that a current or future marriage might end in divorce, and you do not want the ex-spouse to receive part of the inheritance in the divorce settlement.
  • Your child is easily influenced by others who may encourage irresponsible spending.
  • You are concerned the inheritance may be exposed to possible future lawsuits or creditors.

Benefits of Making Some Distributions Now

Treating Your Family Fairly In Your Estate PlanIf you can afford it, you may want to consider giving your children some of their inheritance now, while you are living. Of course, you firsst need to make sure you have enough to provide for you and your spouse if you are married. But if your spouse is much younger (for example, if this is a second marriage), your children may never see their inheritances if they have to wait for the surviving spouse to die.

The benefit to you is that you will be able to see the results of your gifts–seeing your children buy a home, start a business or be able to stay at home and raise your grandchildren; or seeing your grandchild go to college–and know this may not have happened without your help. Also, any gifts you make now will reduce the amount of estate taxes that may be due at your death.

Should They Inherit Everything You Own?

Most parents want leave their children enough that they can do anything they want, but not so much that they will do nothing at all. You don’t have to leave everything to your children. If you have sizeable assets, you can set up trusts for your grandchildren and future generations. You can also make contributions to charitable, educational and religious organizations.

What Suits You?

There are many options when it comes to your estate plan. Contact your attorney to create a plan that best suits you and your situation.

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Special Needs Trust

The Special Needs Trust

Planning for a Disabled Dependent

If you have a child, sibling, parent, spouse, or other loved one who is physically, mentally or developmentally disabled — whether from birth, illness, injury or drug abuse — he or she may be entitled to valuable government benefits (SSI and/or Medicaid) now or in the future. Unfortunately, most of these benefits are available only to those with very limited means.

As a result, you may find yourself faced with a difficult choice. If you leave a substantial inheritance to your special needs person, he will be disqualified from receiving government benefits which may be crucial for his care. On the other hand, you may not want to have to disinherit him in order to preserve these benefits.

Fortunately, a special needs trust will keep you from having to make this wrenching decision.

What is a special needs trust?

A special needs trust must be very specfic in stating that its purpose is to supplement government benefits, to provide only benefits or luxuries above and beyond the benefits the special needs beneficiary receives from any local, state, federal or private agencies.

Special Needs TrustIt is critical that the trust not duplicate any government-provided services and that this beneficiary not have any resemblance of ownership of the trust assets. Otherwise, the government could attempt to seize the trust assets for repayment of services already provided or determine that the special needs beneficiary does not qualify for future benefits.

To accomplish this, you will need to give the trustee complete control over the distribution of the assets and any income they generate; the special needs beneficiary cannot be able to demand any principal or interest from the trust.

Give careful consideration to your choice for trustee. Of course, you (and your spouse) will continue to provide for this loved one while you are alive and able. But someone will need to assume this responsiblity after your death or incapacity.

The most obvious choice is another family member who also cares deeply about this person. But be aware of a possible conflict of interest, especially if she will inherit the trust assets after your special needs dependent has died; she may care more about preserving trust assets than providing for this beneficiary.

Consider using (or adding) a corporate trustee; that’s a bank or trust company that specializes in managing trusts. They can be impartial, and they will be around for as long as your special needs beneficiary lives.

Finally, be sure to work closely with an attorney who has considerable experience with these trusts.