Planning your estate helps assure that your family’s needs and your wishes are protected. Some people, however, make assumptions that complicate this goal. There are some important principles that are worth remembering while you engage in estate planning to protect family and assets.
Tax priorities
Tax savings may be important but should not be the focus of your estate plan. Since a federal law taking effect in 2020, less than three percent of taxpayers meet the $11.5 million trigger for paying estate taxes. Your planning may have tax consequences, but these should not drive your goals and wishes.
You should focus on where you want your assets to go, revenue distribution and value creation. Or you may have to deal with issues such as a family-owned business that your children do not want to own.
Leaving everything to children
You may want to leave most of your estate to your children. However, you should have a discussion on where your assets may be used to the most benefit. Your children can also play an important and satisfying role in distributing these assets through a trust or foundation.
Equal shares
Sometimes, treating children the same is not good business practice or the wise distribution of your assets. Consider their different skills, interests, and capabilities when you divide assets.
For example, you may want to reconsider distributing a business in equal shares if one child has no interest or capacity to run it. This asset may be provided to a more capable sibling in return for another estate asset.
Trusts
Creating a trust may be effective but complicated. A trustee controls assets are that are placed into an irrevocable trust, for example. Their fiduciary responsibility is to the trust’s current eventual remainder and income beneficiaries. Trustees have no duty to the grantor.
This may create conflicts for the trustee, especially if the trustee is a family member and other family members are beneficiaries. This situation can also strain these relationships.
Having a corporate or professional fiduciary serving as a trustee with a family member may be one way to help avoid these conflicts.
An attorney can provide options that meet your goals and your family’s needs. They can also help assure the proper documents are prepared to facilitate your needs.
