After working hard your entire life and reaping the fruits of your labor, it’s natural to want to help your adult children financially. But how do you make it fair without creating drama in your family?
Some kids will never ask for anything, and some will lean on aging parents constantly. And while you’re free to help one child more than another, it’s important to set boundaries—and communicate them—up front, says Morgan H. Smith Jr., a certified financial planner and partner with WorthPointe Wealth Management in Austin, Texas.
What are the benefits of an Estate Plan?
A crucial piece of the puzzle: having an estate plan. With a will and a trust, you can specify your wishes to ensure each of your children benefits the way you see fit, Smith says. While a will covers who should get what from your estate after you die, a properly funded trust goes into effect as soon as you sign it.
“Within a trust, you can spell out in writing your wishes and select a private fiduciary to ensure your wishes are followed,” Smith says.
How do I make it fair?
If you want to help your children equally, take the emotion out of your decision. For example, if you’ve helped one child more than another, your trust can stipulate that Child A will get their full inheritance while Child B gets the inheritance amount minus any financial gifts already given over the years.
Be sure you keep a full accounting of all monies you’ve gifted to your children and that you stay below the annual gift tax exclusion amount of $14,000 to avoid having to report it to the IRS.
What is the best way to keep the peace?
A family meeting to discuss your estate plan can help avoid confusion or hurt feelings down the road. Ultimately, consider the legacy you want to leave behind.
“You don’t have to leave cash for your children,” Smith points out. “If you have excess wealth, consider how you want your grandchildren and their children to benefit. You could start a foundation charity and put them in charge or create a college-savings account.”
About the Expert
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