When you are planning your estate, you are doing so with the knowledge that you will not be around to see how things unfold when the assets are being distributed. This being stated, you should certainly consider the consequences of your decisions. If your estate plan allows for uneven distributions among siblings, it can cause serious problems that damage relationships.
Communication is key on this level. Some people find it difficult to discuss very sensitive topics, and this is understandable. However, you can prevent future disputes among siblings if you communicate the reasons why you are making your choices. All of your children may not agree with them, but they will not blame one another after you are gone.
The above being stated, there are things that you can do to prevent disputes when certain circumstances exist. In this post, we will look at two different scenarios that can cause disputes, and we will share the widely embraced solutions.
Estate Planning for Family Businesses
There can be some inherent challenges present when you are planning your estate as a family business owner. The best way to explain this tricky estate planning situation is to provide an example. Let’s say that you own a restaurant, and you actually inherited it from your parents. It has been in the family a long time, and it is one of the most popular eateries in town.
You have one son and one daughter. Your son went to culinary school after high school, and he went on to study restaurant management. After graduation, he expressed his desire to help you run the family business. Of course, you opened the door, and he has worked beside you ever since.
Your daughter never had much interest in the restaurant business. She went to college in another city, and she accepted a career position in that area after she obtained her degree. You are still relatively close, and you love, respect, and support each of your children equally.
This dynamic presents an estate planning conundrum. You definitely want to leave the restaurant to your son after you pass away, and he wants to continue to run the business for the rest of his life. However, the restaurant generates a great deal of income, and the property itself is worth a lot of money.
The restaurant is by far your most valuable possession. You could leave your daughter everything else that you have and it would only be a fraction of the value of the business. What do you do under these circumstances to be fair to your daughter and prevent a dispute between your children?
Under these circumstances, you could use life insurance to balance inheritances. You determine the value of the business and the income it generates, and you take out a life insurance policy that pays a benefit that is equal to the value of the restaurant. After you are gone, your son will continue to run the restaurant, and your daughter will receive a sizable inheritance.
Unfortunately, a significant percentage of people become unable to make sound decisions at some point in time. There are many causes of incapacity, and Alzheimer’s disease is at the top of the list. We have all heard of this horrible disease, but people are often surprised when they hear about its widespread nature. The Alzheimer’s Association tells us that 40 percent of people that are 85 years of age and older have contracted the disease.
If you do nothing to prepare for incapacity, your family would have no choice but to petition the state to appoint a guardian to act on your behalf. This is a necessary remedy, but the proceeding can lead to disagreements among siblings with regard to the person that is empowered to act as a guardian. Plus, the court could appoint someone that you would not have chosen yourself when you were capable of sound decision making.
To prevent a guardianship and the problems that go along with it, you could proactively include an incapacity planning component within your broader estate plan. With a durable power of attorney, or even better, a revocable living trust, you can name someone to handle your financial affairs. You could add a health care proxy to name a medical decision maker, and you could include a living will to state your life support preferences.
When you take these steps, your own true wishes would be honored if you become incapacitated at some point in time, and there would be no cause for disagreements among your loved ones.
Attend a Free Workshop!
There are some great opportunities coming up in the near future if you would like to build on your estate planning knowledge. We are holding a series of free workshops over the coming weeks, and you can learn a lot if you attend the session that fits into your schedule. To learn more, visit our workshop schedule page and click on the date that works for you.
- Why Would I Use a Living Trust? - June 24, 2021
- Estate Planning Conference Discusses “For the 99.5% Act,” SECURE, and More - June 23, 2021
- Inconvenient Truths Make Incapacity Planning a Must - June 22, 2021