No one wants to cause a war within their family as their legacy. The reality is, however, that family harmony can suffer when wealth is transferred to the next generation. Rifts among siblings and between family members and charities can last for decades or lifetimes.
Some disputes even end up in court. The key is effective, honest communication — and planning. Who gets sentimental items like Mom’s engagement ring or Dad’s watch? Why was one child’s inheritance placed in a trust yet the other’s was not?
The first step to plan for peace is to find out who wants what and what your children’s various priorities are, and then taking special care to be explicit when writing your Will so your instructions are crystal clear.
Here are some planning strategies to avoid common sources of conflict:
Think “Switzerland” as executor
Consider assigning an independent third party executor, rather than burdening a family member, particularly if there’s potential for discord between the executor and another relative
Be practical about inequality
Treating your children fairly does not always translate into treating them equally. Siblings usually assume that your estate will be equally distributed among them. When a child will be given more or less than other children, ensure that everyone knows ahead of time and clearly discuss your reasons. Ensure that your lawyer properly documents your rationale for your decisions.
Reward your caregiver
When a child has cared for a parent in later years, he or she may expect to be compensated. This matter should be addressed during your lifetime, ensuring that your caregiver child and other family members know what to expect ahead of time. Document it and make it official.
Plan for property
Sometimes unintentional inequity occurs if you have property that passes to a child outside the estate, through joint tenancy or beneficiary designations. It is essential that such matters be reviewed with your estate planner to ensure an integrated, effective estate plan.
Giving during your lifetime
Consider giving personal gifts now. Sentimental items such as jewelry and family heirlooms that are not mentioned in the Will are often a source of friction among family members.
Consider giving these key items away while you are living — another benefit is that you’ll have the chance to see your gifts enjoyed. Alternatively, consider bequeathing specific items in your Will.
If you made substantial loans or gifts to some children during your lifetime, clearly state whether or not these should be considered an advancement on their portion of the estate. If a loan is to be considered a debt owing to the estate, proper documentation must be maintained to enable the executor to enforce the debt.
With advance planning and open communication with your loved ones, you can ensure that you leave a legacy that preserves family relationships as well as financial assets.
Heather Holden, PhD, CIM
Wealth Advisor, ScotiaMcLeod