There is nothing more effective than telling your beneficiaries face to face what you want to have happen with your estate. This will reduce the feeling of unfairness among your kids if you have spoken to them and given them the ability to be part of the conversation.
A family meeting can be stressful to put together but your aim is to reduce stress down the road. You want to ensure your wishes are carried out without triggering conflict that could have been avoided by a simple family meeting.
You have to decide on a few things first:
- Who do you want to invite? Who don’t you want there? If you just invite your kids, you may have the unintended effect of pillow talk from their spouses.
- Have an agenda. Know what items you want to discuss. Have a plan in mind. Consider if you want to have input from your children or not.
- Have some rules. You may want to have your lawyer there to act as a facilitator or mediator.
You would be wise to ask your kids what they think after you have presented your plan. Allow a discussion. Try to ensure everyone hears your plan and feels heard. You may not get everyone’s approval but it goes a long way when your beneficiaries feel heard.
An important intent of your estate plan should be to reduce your taxes.
There are four main ways to reduce the taxes on your estate:
- Consider setting up a trust.
- Give some of your possessions away while you are still living.
- Consider gifting money or assets to a charity.
- Invest in life insurance to transfer your assets outside of your estate or cover your tax bill.
Gifting To Family In Your Living Years: What You Should Be Aware Of
“Why do I need to be cautious about this, and what does it mean for me?”
If you are planning on gifting while you are still alive, you can avoid estate administration tax, but you will likely trigger a capital gain on transferring the ownership of the asset. Understand that the future gains would be taxed in the hands of the recipient unless you gifted to your spouse or minor children, and the gift produces income. In that case there is income attribution and this income is taxed back to you. You can avoid this by lending the money at a prescribed interest rate.
Gifting To A Child
Tip: Attach a gifting document to your will called a ‘doctrine of tracing’. This is simply a paragraph that allows future growth on an asset to be in the name of your beneficiary child, not to be split 50/50 between them and their spouse.
Beware. A child can undo all the good planning of the parents by doing these two things:
- Putting their gift or inheritance into a jointly-held property with their spouse via a bank account or investment.
- Putting it into the matrimonial home or paying down the mortgage, even if it is owned 100 percent by the beneficiary.
In both these cases your inheritance is co-mingled and now becomes fully dividable upon marriage breakdown.
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