WHO SHOULD RECEIVE YOUR WEALTH? TIPS FOR AVOIDING FAMILY CONFLICT
Only a third of us in this country have a plan in place for our prized possessions, property and final wishes if we were to pass away today.
More directly, that’s about 166 million of us leaving our hard-earned wealth up to chance or, in most cases, up to the state to sort it out.
In the legal world, if you die without a will, it’s called dying “intestate.” A local probate court then has to decide how to distribute your property.
In some cases, this can take years—and lots of money.
Holocaust survivor and Staten Island developer Roman Blum, for example, died in 2012 with a $40 million estate—and without a will. Unfortunately, his fortune, contested by two people, has been whittled down dramatically by taxes and attorneys’ fees.
Although deciding who should inherit your wealth may feel like a heavy load, consider Blum’s sad situation. If you die without a will, the consequences may range from inconveniences like delays to adversities like years of court battles.
Let’s do all we can to avoid the latter by first asking this question:
Who Should Inherit Your Wealth
Leaving a legacy for those who will inherit your wealth requires careful documentation and estate planning. A key consideration is choosing beneficiaries.
In the broadest sense, a beneficiary is a person or other legal entity (like a nonprofit organization) who receives the benefits of property owned by someone else. Beneficiaries often receive these benefits, like real property, financial assets or family possessions, as part of an inheritance. For example, the beneficiary of a life insurance policy is the person who receives the payment of the amount of insurance after the death of the insured.
You should name a beneficiary for all of your assets including:
property, including real estate, vehicles, jewelry, furniture, collections
money
insurance policies
retirement accounts
stocks and bonds
IRAs
bank accounts
The Big Question: Who Will Be Your Beneficiaries?
Unfortunately, there’s no hard and fast rule for objectively deciding who or what will inherit your wealth. Making these choices is a personal decision. And you have every right to make the hard choices that fall in line with your values and the people and places you care about most.
There are, however, some questions you can ask yourself to bring clarity and peace to your decisions about your beneficiaries. They are:
Who needs your financial assistance?
Do you have children who are minors?
Do you have pets you want to protect?
Can you safely leave your heirs an inheritance without any conditions?
Do you have any assets that you want to remain in the family?
Are there any churches, charities or nonprofits you want to donate money to?
Keep This in Mind Too
If you leave liquid assets (an asset that can easily be converted into cash in a short amount of time) to someone, it could adjust their income significantly. This, in turn, could negatively impact their benefits like Medicaid and disability.
If your goal is to leave assets to minors, an adult child with questionable judgment or a dependent with a disability, making a trust your beneficiary might be best.
You may be able to make a trust the beneficiary of a retirement plan for tax purposes, instead of letting it become part of your surviving spouse’s estate.
You can leave specific assets to different beneficiaries in your estate plan, like a piece of property to a child from a past marriage or a bank account to a grandchild.
Worried Your Decisions May Cause Family Conflict?
A piece of advice I often share with clients is to meet that fear head-on, because if you don’t do it now, the consequences could, at worst, be lasting family discord or broken relationships.
Talk candidly to your family after your estate plans are put into place. Share details about the terms of your estate and beneficiaries to limit potential surprises, confusion and conflicts later. A little clarity now can reduce the risk of family conflicts in probate court later.
This article offers such an interesting perspective on why family members argue over an inheritance.
Some underlying reasons for tension:
Our psychological sense of self is intertwined with the approval that an inheritance represents, especially when the decedent is a parent.
We are genetically hardwired to be on the lookout for exclusion, sometimes finding it when it doesn’t exist.
Families fight because the death of a loved one activates the death anxieties of those left behind.
HELPFUL CONSIDERATION: Make sure the beneficiaries on your estate planning documents and the beneficiaries on any annuities, life insurance policies, retirement savings accounts and other assets are aligned to avoid disputes.
Giving Your Wealth (Or Some of It) to a Favorite Charity
Yes, you can do this! There’s no family “law” that says you must leave your wealth to loved ones only. If you choose, you can leave some of it—or all of it—to a charity that holds special value to you.
Many charities already have policies in place to guide how they handle estate gifts. It’s important, however, that both you and the charity are clear about the terms and conditions of the gift to avoid issues like potential disputes and other legal issues as much as possible.
Deciding who should inherit your wealth can be a source of stress, but it doesn’t have to be. Prep yourself with the right mindset, process and people at your back. Let’s get started today.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
