A major purpose of estate planning in California and elsewhere is sometimes misunderstood. An important goal is often to preserve the assets and make them available to improve the lives of another generation of one’s family. At the same time, it important to preserve family harmony in the process of wealth transfer, which is a subject to which wills and other estate documents can be helpful if accompanied by the proper measure of information and open communications.
In order to prevent various common problems from interfering with the smooth transfer of wealth and the premature dissipation of assets, certain steps should be followed. First, one should carefully decide the intended distribution of assets. Although people want to distribute their estate equally and fairly, the reality is that the children are not necessarily equally responsible or capable.
In addition, some children have already received various distributions during the parent’s lifetime. This makes it difficult to make a distribution that divides the property in strict equal shares because some heirs will know that certain distributions were already made. One way around the problem is to offer certain basic distributions during the parent’s lifetime, such as for education, purchasing a home, and other chosen purposes. These “fair” gifts are offered to all heirs during the parents’ lifetime, but they may have to become limited after the parents reach a certain advanced age.
Sometimes a person will want to provide gifts to people who are deserving and were particularly helpful during the benefactor’s life. The remainder of the estate may then be split equally between the children. This is called a blended distribution, but the chosen approach will be made by the individual based on many considerations.
It is also important for the individual or married couple to inform the children early about the terms of the estate, the wills, trusts and other instruments, along with the reasons for the various distributions and benefits. Surprise often leads to dissension and accusations of unfair treatment. It takes a concerted effort to maintain the communication channels so that misunderstandings are minimized. In California and elsewhere, the process is an important one that requires careful planning and execution.
Source: Forbes, “Two Key Steps To Successful Estate Planning“, Bob Carlson, May 15, 2018