Many people hate to think about their own mortality, and that can lead them to neglect to put an estate plan in place to pass along their assets to children. But even some people who do have a plan fail to discuss the details with their closest family members.
Holding family conversations over the specifics of a will or trust can help eliminate hard feelings, or even legal disputes once a loved one passes away, and their estate is distributed. While estate plans seek to address financial concerns, an even more important benefit may be family harmony.
Planning for life without mom and dad
A comprehensive estate plan typically includes a will, a trust detailing how both parents’ holdings will be managed while they are alive and after their death, naming a trustee and an executor for the estate. It should also include:
- Durable power of attorney
- Living will
- Advance medical directive
- A letter of intent outlining the parent’s or parents’ wishes
Dividing a family home, vacation home or rental property
Whenever more than one child is an heir, it’s essential to conduct family forums where siblings can communicate their wishes over the estate. These should be held periodically when circumstances change. Both the parents and the heirs can consider several options for distributing property, including:
- If one sibling gets the house or a greater share of the property, parents can balance the distribution by giving the other heirs a larger proportion of other assets, such as a life insurance policy
- Put the home into a limited liability company (LLC) or a trust, making it easier to manage the property financially and legally, and keep it out of probate
- If the home sits on a large piece of land, designating some of the property for a conservation easement could help defray taxes and help heirs financially going forward
- Have a sibling who lives nearby buy out the portions of the home held by siblings who live farther away
- Siblings can also agree to jointly buy the property and rent it out, either to another sibling or a third party
- One sibling can pay for upkeep on the property and accept a promissory note from others to repay those costs over time
Avoid family conflicts with frank discussions
Poorly structured or secretive estate plans are much more likely to lead to animosity between family members when a loved one dies. In addition, if a home or other real estate isn’t transferred into a trust before the parent passes away, the estate will likely end up in probate court. When siblings fight over property, probate can be a lengthy and costly process.