It would be nice if all families were happy but, unfortunately, that’s not the case. Every family has challenges but some are significantly harder to work through than others. What do you do when you’re not sure whether or not to include one of your children in your will? Here are some ways to handle a beneficiary that’s a challenge to your family dynamic.
Families face a lot of challenges. If there’s someone in your family who always makes things difficult for everyone else, you’re not alone. Whether you have a son that’s caused a rift in the family, daughter with a history of substance abuse, grandson with a criminal past, or a child that’s just bad with money, figuring out how to distribute an inheritance isn’t always easy.
Before you make any decisions, it’s important to thoroughly evaluate the situation. Sometimes, there’s a fine balance between giving someone their part of an inheritance and assets and enabling a dangerous lifestyle. Other times, it may be that you just plain don’t get along and aren’t sure what to do..
At the end of the day, you’re still family, but only you can decide what that means. Here are some ways to work through family dynamics and make those difficult decisions when planning your estate.
1. Leave them a small amount outright.
This is a safe option that leaves them something without you worrying about wasting your inheritance on someone who you’re not sure deserves it. They could be a named beneficiary of a small life insurance policy or the sale of a small piece of property or you can leave them a small amount of money that’s less than what your other heirs are getting. It might be difficult to determine an amount that’s fair but your lawyer and financial advisors can help by taking into consideration the total value of your estate as well as what you’re leaving to other beneficiaries.
2. Don’t leave them anything at all.
Disinheriting a child happens for a lot of reasons and is a lot more common than you might think. Maybe they have an addiction or a criminal lifestyle that you just can’t get past or maybe there’s such a long history between you that you no longer have a relationship. Whatever the case, there are valid reasons for being excluded from your will.
You may also choose to leave one child out of your will so that another child gets more. A good example of this is when one child is financially secure and has a sibling with a disability requiring long-term care. Making sure there is enough money to cover the cost of care is important but it’s you should also make sure that the healthy child isn’t going to be burdened with the responsibility of caring for their sibling at the expense of their own career or financial well-being.
Whatever you choose, you don’t have to defend your decision. After all, you spent your whole life working for your assets. But disinheriting a sibling can cause real problems after you’re gone. It can cause a bigger rift in the family that could last for generations so it has to be handled carefully.
There’s a chance that the disinherited child will file a claim against your estate to get what they feel they’re entitled to. Be sure to explain any decisions very carefully in your will so that there aren’t any grounds to contest.
If you make the decision to disinherit one of your heirs, revisit the decision regularly. Perhaps the two of you will work through your problems or they’ll change their destructive behavior and you’ll have a change of heart.
3. Rely on a Trust
If you want to leave your wayward child an inheritance but are afraid of what they would do with a lump sum of money, a trust is a great option. It gives you control over how and when money is distributed without the possible problems that come along with completely disinheriting someone.
Some trusts allow you to designate a trustee to manage the inheritance for your heir. It’s very important that you make your wishes known and choose someone who you can trust to fill this role. Your heir has no legal claim to the funds and the trustee you designate has full control over any distributions. In most cases, it’s better to appoint a professional as trustee to remove any tension between family members.
Incentive trusts are another option. They stipulate the circumstances in which distributions are made. For example, you can dictate that no funds are to be given to your child unless they stay sober, maintain sobriety, or hold down employment for a certain length of time. Alternatively, you can designate money that’s only to be used to pay for education or living expenses. This is one way to encourage good behavior without completely cutting someone out.
Keep in mind that there are frees and other costs involved in setting up and maintaining a trust but in most cases, it’s a small price to pay to keep the relationships between your beneficiaries intact.
Get the Right Advice to Make a Fair Decision
Estate planning can be very challenging when there’s a wayward child involved but consulting with the right professionals can help you figure out a fair solution. Take the time to think about what you really want then consult with your attorney, accountant, and financial professionals to help implement the right strategy.
Raymond James does not provide tax or legal services. Please discuss these matters with the appropriate professional. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Any opinions are those of the author, and not necessarily those of Raymond James.