Planning For and Executing Inheritances (Part One)

Planning for, and then executing, inheritances is often fraught with emotion.

Most families choose to leave the inheritance “to my children in equal shares, per stirpes.” Per stirpes is Latin meaning “by the roots” so that if a child dies before the parent, their share goes to their children (if any) in equal shares. If there are no children, then generally the inheritance is disregarded and their share goes to their surviving siblings in equal shares.

What about gifts to grandchildren? Let’s say one child has five children and the other has two children -- seven grandchildren altogether. When a significant gift is given to grandchildren equally, it is not uncommon for the child with two children to say “well it was my brother’s choice to have five children, why do I have to pay for it?” Good estate planning also looks at inheritances from the heirs’ point of view as well.

We are often asked whether inheritances should be discussed with children ahead of time. While each family has different dynamics, this can end up being the equivalent of giving children a veto power over what you are going to do. For example, if you seek their opinion on an unequal division, you will create a problem for the family if you choose to disregard their input. A better way might be the use of the “soft probe”. Here, you suggest an idea that you have about an unequal division, and then gauge their reaction before making a decision.

For example, where one child is very much better off then another, you might say “You know, your sister Mary could really use our money a lot more...” The monied child will generally respond one of two ways. They will either say “of course, I don’t need it, leave it all to her” and you are off the hook, or they will indicate that they consider anything less than equal shares would be unfair. In the latter case, if you still want to help Mary more, you may give her gifts during your lifetime and keep peace in the family by leaving inheritances equally. You may also make some accounts joint with Mary or name her beneficiary and those accounts would not appear under the will or trust as part of the estate.