As much as parents despise talking about money even with their adult children, the appropriate measures to ensure proper management as you age and after you’ve died don’t always require a painful process to get it right.
This is the second of two blogs (yesterday and today) on this important topic. I hope you find it helpful.
The Washington Post recently discussed practical strategies for financial security in an article titled "How to pass money on to your children."
Create a trust. Parents and grandparents with substantial assets may consider a trust. Some families may create a revocable living trust, which wouldn’t have to go through probate and could be changed or canceled at any time. Assets are owned by the trust, which is controlled by the creator until he or she died or becomes incapacitated. The trust would subsequently pass to a successor trustee—like a child or other loved one—who then can oversee the trust and use the funds to pay bills and later to disburse the money to family members or others.
Simplify. If your family members are all “singing from the same songbook” as far as saving and finances, consider designating one child to be responsible for dividing assets among the family. Another way to do this is to set up a joint tenancy with one child—he or she can use the money to cover bills while their parent is still alive and then would be tasked with splitting up the assets after the parent passes. This approach has many pitfalls and should only be used in unique circumstances and only after a full discussion with an estate planning attorney. On the other hand, an estate planning attorney may counsel you to consider what is called “a transfer on death deed”—this passes real estate to one child when the last surviving parent dies. This transfer leaves the parents in full control until both of their deaths. But it’s important to remember that both of these arrangements can put just one individual in control of the estate after the parent dies. This can be a potential powder keg and could cause fireworks in the family if that person decides not to share what’s inherited with the others, or has creditor problems, marital problems or dies before making things right. Some parents try to avoid this by naming all of their children in the tenancy or in the transfer of death deed, however, all of the kids would have to agree on how to treat the assets. If it’s likely there might be issues, one should put detailed instructions in a will or trust. Your estate planning attorney can answer these questions and plot a strategy that works best for you and your family.
You can learn more about this topic as well as other strategies on our website under the tab entitled: estate planning in Virginia. Be sure you also sign up for our complimentary e-newsletter so that you may be informed of all the latest issues that could affect you, your loved ones and your estate planning.
Reference: Washington Post (November 3, 2014) "How to pass money on to your children"