Distributing Assets to Adult Children
When your children were young, your primary concern was probably how to provide for them in the event you and your spouse died. Even though they may now be grown, your children are probably still the center of your estate plan. Just because they are adults doesn’t mean that you have to leave their entire inheritance to them outright. Consider these factors first:
• Do you want to distribute your estate gradually? If substantial assets are involved, you may want to set up trusts to distribute your assets gradually, such as in thirds when each child reaches age 25, 30, and 35. You can always give the trustee power to make early distributions for items like to pay for college, to start a business, or to purchase a home.
• Have you selected a trustee carefully? If trusts are involved, you want a trustee who is impartial and will deal fairly with all your children. Think twice before naming one of your children as trustee. With one sibling in a position to decide what happens to another sibling’s inheritance, this can cause disagreements between siblings.
• Have you thought about the consequences of a child divorcing? You probably don’t want some of your assets distributed to an ex-daughter-in-law or ex-son-in-law, so special provisions may need to be added to trusts.
• Have you considered how assets will be distributed among children? Perhaps one child is better off financially than your other children. Do you divide your estate equally or give less to the financially well-off child? Children often feel a right to an equal share of their parents’ estate, even if they have a substantial estate of their own. If you decide to make unequal distributions, be sure to explain why.
• Do you need to make special distributions to even out inheritances? Perhaps you have paid all college costs for some children, while other children have not attended college yet. You may want to ensure that all children receive a college education, and then distribute the rest of your estate equally among your children.
• Should you coordinate your estate plan with your children’s estate plans? If your children have substantial estates of their own, it may not make sense to leave additional assets to them. They may prefer those assets go directly to their children, helping to minimize family estate taxes.
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