Estate planning comes with many challenges, chief among them being the division of your assets among multiple heirs.
Many parents believe that their kids will be able to apply reason and rationality throughout this process but when it comes to love, death, and money, sensibility tends to fly out the window.
It’s critical to have a written plan and properly communicate that plan to everyone it involves. Enlist the assistance of your financial planner, estate planning attorney, and tax professional to ensure that your estate best reflects your wishes for the future.
How can you split your assets without dividing your family? Let’s take a look at a few ideas.
Use a fair and equitable hand.
While you can divide your assets in any manner you choose, it’s often prudent to be as fair and equitable as possible when more than one beneficiary is in the picture. Unbalanced inheritances can cause undue stress, hardship, and even legal battles among siblings—an outcome you can’t mitigate when you’re gone. Let’s take a look at a few things to consider when dividing your estate.
Split assets equally
Fair and equitable will have different applications for different families. In your family, that might mean dividing your estate equally among your children. To do that, you’ll need to assess the monetary value of your assets and split them into an even distribution. Your financial planner can help you look at the value of each asset and split it that way.
Things get a bit more tricky when property or business assets are involved. You might want the house to remain in the family but neither of your kids is in the area or are planning to move back. Be sure you talk with your kids about your wishes and work out any wrinkles in the plan to diffuse tensions before they arise.
Equally distributing your estate is perhaps the most straightforward and painless way to give your assets, but it certainly isn’t the only way.
Split assets equitably
Just because you want to divide your estate fairly, doesn’t mean that you have to split it equally. In lieu of an equal split, you can look at equitably giving assets. Keep in mind that opting to give one beneficiary more assistance than another could lead to disagreements. It might make sense to do this, however, if one child requires more help than the others.
A child with a disability, for example, may require additional medical care or assistance with daily activities. You may want to leave more to them to help cover those costs with a special needs trust or other methods. Most families wouldn’t bat an eye in this situation, but it’s still important to communicate your plans to all your kids to make sure everyone is on the same page, and there is no confusion once you’re gone.
There are also many other personal reasons you might want to give one child more than another. Perhaps your daughter was your primary caregiver and you want to repay her for the sacrifices she made. Maybe you don’t want to enable or support a child with an addiction or an unstable history with financial management. You may have also given more to a child throughout their life—schooling, wedding, down payment on a house, etc. and want to give more to your other children through your estate.
You have the right to divide your estate in any matter that you see fit, but it’s valuable to be as fair and equitable as possible with multiple beneficiaries to maintain family harmony.
Account for personal property.
The selection of the IRA beneficiary isn’t likely causing irreparable damage. Instead, it’s usually the family diamond, the hand-painted grape dish set, the first-edition book, or fine art that catalyzes arguments.
Personal property can be difficult to manage because each item holds varying monetary and sentimental value. For people with a wide collection of property, it’s also nearly impossible to list who gets what in the will without it rivaling the length of War and Peace. How can you make a conscious effort to plan for these assets in the estate planning process? Here are a few ideas to consider.
- Give assets while you’re alive. If you always planned on giving your granddaughter your opal ring, consider gifting it to her while you’re alive. Bequeathing jewelry, china, artwork, artifacts, and other valuables throughout your life help ensure you know where your items are going and avoid posthumous arguments.
- Create a memorandum. Memorandums can be used in several contexts and one of them is clearly naming recipients of your personal property. Your estate planning attorney can help you construct it as an extension of your will, making it legally binding.
- Encourage the executor of your estate to help make a plan. Perhaps you leave some of the division to your family and the executor of your estate. They can work together to come up with the best solution. Talking about it now can give you a voice in the process.
Personal property can be tricky, but a well-structured plan can help the process move as smoothly as possible.
Encourage open and honest conversations.
All of these scenarios have something in common—transparent communication. Successfully transferring your estate to multiple heirs hinges on robust communication. By encouraging an open dialogue, everyone can ask questions and ensure their voices are heard. It’s also a space for you to communicate your wishes and priorities.
You and your family need these conversations. Assets don’t divide themselves and it’s unlikely that everyone will be on the same page, no matter how good of a relationship you have with one another.
Sometimes it’s best to hold a family meeting with your financial team present. That way, you have an unbiased professional to help lead the conversation and help communicate your wishes. Estate plans can get muddled by numbers, acronyms, and jargon so having a professional there to translate could prove invaluable to temper tensions.
It’s unlikely that your entire family will be confident and comfortable with your plan in one visit, so perhaps you set up a few different meetings to ensure all of the topics are sufficiently covered.
Remember your legacy.
Your hopes, dreams, and wishes for your legacy should help inspire your strategy for dividing your assets. For you, that might mean splitting your estate between your children and also leaving some to a charity that means a lot to you.
You might also want to set up an education fund for your grandchildren and use your money to further their development. Whatever you decide, make sure that it illuminates your goals and values.
Your estate plan should be a reflection of your legacy. While dividing your assets can be complicated, our team is here to help you build a plan you are proud of. Is your estate plan aligned with your values? How can the distribution of your assets better reflect your legacy? Let’s take a look at it together.