It will be great if your estate plan saves your loved ones from a big tax bill, but chances are it’s really not doing enough. Although estate planning techniques may do a good job of addressing possible tax problems, they may not consider the family dynamics that may long outlive you and your savings.
CNBC’s recent article, “This threat could devour thousands of dollars from your estate,” notes that even families that look like they're perfect, are not. Perfection doesn't exist. When families fail to address these types of issues in their estate plans, it can create conflict between beneficiaries.
Here are some ways your estate plan can drive a wedge between your family members, and how you can avoid that kind of trouble.
Blended families, typically couples with children from prior marriages, need some special attention during the estate planning process, to make certain the assets go to the right heirs and that nobody is accidentally disinherited.
Things are a little more complex for fractured families. That is when the children and parents are estranged. Even when the estrangements are long-standing, sometimes there's an expectation that a child will inherit from the parents.
In some cases, younger adults should know a little about money management. If they have trouble with money, ask your estate planning attorney about trust options. If a child isn’t very diplomatic or sensible, he or she may not be the best person to name as trustee. It’s common for a parent to pick family members, but they rarely have a sound rationale for doing so. An independent trustee such as a bank, an attorney, or an accountant acting as a fiduciary can be a good solution. This is an independent third party that can lessen family fighting.
It’s also wise to talk about family conflict early in the planning process and be certain your heirs have some idea about what they're likely to receive. You don't have to tell your beneficiaries all the specifics, but you can keep them updated on the general structure of your estate plan, while you're alive. That way your estate will convey a sense of love, value and respect, as well as wealth.
Reference: CNBC (June 14, 2018) “This threat could devour thousands of dollars from your estate”