Choosing how to leave your legacy where children are concerned is not always an easy decision for Pennsylvania parents. Deciding what is fair for your children may seem like an easy concept, but it is not always so cut and dry when it comes to estate planning.
For instance, do you have more than one child? Is one of them a minor while another is a married adult? Does one struggle with employment while the other has remained at the same job for years? Does one child have children of their own? Does fair mean that each child gets equal amounts of money or ones that are fitting to their situation?
In some cases, parents might leave a portion of money to one child and leave a small amount or even nothing to another child. Why? Maybe a parent feels that one needs it more than the other. This plan might work for some, but in other instances this can make one child feel like they were left out, disinherited or less loved.
While this disenfranchised feeling may not have been intended, it still happens. Keep in mind as well that financial situations can change. A child with stable finances can hit an unexpected turn of events. It could be anything from downsizing at work to a serious car accident or medical diagnosis.
So how can a parent plan for a future that they can't see? A sprinkle trust is one estate planning tool that can help even things out even when circumstances change. A trustee controls the distribution of funds and terms can be set that require the trustee to assess the financial situation of each beneficiary periodically.
Trusts can also be structured in such a way that funds must be used for only one purpose such as education or health. Restrictions and requirements for distribution can even be placed on the beneficiary. For instance, a child struggling with addiction could be required to have x-number of negative drug tests or a successful completion of a rehab program before they are eligible to receive a disbursement.
The best way to determine what kinds of estate planning tools best fit an individual situation is to have a discussion with an experienced estate planning attorney. The attorney will not only provide detailed information about each option, but can also tailor a trust to fit exactly the needs and concerns of the parent establishing the plan.
Source: Bloomberg, "You Want to Cut Your Kid Out of Your Will. Or Do You?" Lewis Braham, July 23, 2013