Estate Planning: Essential Tips for Distributing Assets Fairly and Effectively

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When it comes to estate planning, there are several crucial considerations to ensure that your wishes are carried out smoothly and fairly. Here are some key points to keep in mind:

1. Thoughtful Distribution to Children

Children can be biological, adopted, or from current or past relationships. When planning to distribute your estate to your children, consider doing so based on age rather than conditions like marriage, having children, or graduating from college. This approach simplifies the process and maintains the purity of your intention to give. For example, you might allocate 25% of the inheritance at age 18, another 25% at age 25, and the remaining 50% at age 30.

2. Setting Up a Secondary Trust for Children

Establishing a secondary trust that activates upon your death can be beneficial for the children in your estate. Including investment language that restricts investments to short-term AAA U.S. Treasuries or money market funds ensures that the funds will be available when the child reaches the appropriate age. Once the child receives the funds, their management of the money is their responsibility, relieving the Executor of any further burden.

Fairness3. Ensuring Fairness in Distribution

Estates are often not divided equally, reflecting the unique dynamics of each relationship within the family. A typical legal document may include clauses for minimal distributions or exclusions. It’s crucial to provide clear, detailed reasons for your choices, going beyond legal requirements to prevent misunderstandings and ensure that your intentions are respected.

4. Compensating the Executor

Consider compensating your Executor or setting up an hourly or monthly payment plan that they can accept or decline. This ensures that the Executor is adequately rewarded for their time and effort. (For more details, see our separate blog on choosing an Executor.)

5. Transparency with Trust Contents

Decide if you are willing to share the contents of the trust with those mentioned in the document while you are still alive. If you prefer not to, ensure that everything is well-documented and securely stored, accessible to your lawyer and Executor.

6. Managing Secret Accounts

If you have secret or personal accounts, understand the potential complications if they are not titled correctly or easily discovered by the Executor. While it’s common to have a personal savings account, making sure it’s properly documented can prevent future headaches.

Protecting Valuables7. Creating a Living Will

A living will, also known as an Advanced Health Care Directive, is vital. This document ensures that your medical wishes are followed and prevents any family member from making life-ending decisions for financial gain. We’ve all seen enough dramas and real-life stories involving greedy individuals to know this is a real possibility. (See our separate article on this topic for more information.)

By considering these points, you can create a comprehensive and fair estate plan that reflects your wishes and minimizes potential conflicts among your heirs.

 

Ian Goldey, the author of this article, brings over three decades of experience as a private wealth manager, assisting families with their financial planning. He has applied this extensive knowledge, along with his partners to create WhenIDie.com, a digital platform that simplifies the entire process of death planning and more. Try it free for 30- days. Apply this code 2024BLG15 for a 15% discount!

 

Legal Disclaimer

The information provided in this blog is for general informational purposes only and is not intended to be tax, legal, or financial advice. Readers should not act upon this information without seeking professional counsel tailored to their individual circumstances. While we strive to ensure the accuracy and reliability of the information presented, we make no representations or warranties regarding its completeness, accuracy, or current applicability. The use of this blog does not create an attorney-client or accountant-client relationship. For personalized advice, please consult a licensed attorney, tax advisor, or financial professional.

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