WHO SHOULD INHERIT YOUR WEALTH?
Introduction
Many people put off estate planning because they assume everything will work out fine if they die unexpectedly. However, this is not the case all the time. Who inherits your wealth is a key factor that needs to be taken into account in the planning of your finances. Some people fantasize about receiving an inheritance like it will be a dream come true. But when it comes to giving an inheritance and deciding who should receive what, the process can be a lot less thrilling. It is not a process that can be undertaken overnight to establish wills and trust funds. You'll have to think about who might be best able to benefit from some of the assets and how they should be distributed. In estate planning, deciding who will inherit your wealth or how much is the first and most important decision you'll make. To some, this question is easily answered. They want to keep it simple and will designate their spouse first and then their children second, in equal portions. Well, the answer isn't so clear for others. Perhaps you'd like to think about the fact that there are other needs or abilities in your family. You may not have a partner or children, but perhaps you have philanthropic goals or wish to provide for a dear friend or beloved pet. Most distributions are possible with the right planning.
One important consideration for many people, including those who have amassed significant wealth during their lives, is determining exactly who they should pass along their assets to when the time comes. Most folks want to feel assured that their hard-earned money will go to those who will appreciate it and who also might need it. A lot of hard choices are made during estate planning, and it is often one of the most difficult parts of this process to decide who should inherit.
The level of responsibility and financial management skills of potential beneficiaries are another important factor to take into account. While the provision of financial support may be desirable to a family member who does not take care of his own finances, there have been cases in which this has resulted in ongoing disagreements over money. In addition, for the purpose of making sure that funds are properly used, one can choose to set up a trust which is able to draw down resources progressively over time or in specific cases e.g. with regard to education and health costs.
We're all hoping to live forever, so we avoid thinking of what happens when we die. This is the reason that many people do not have valid wills when they die. Many people put off writing a will because they assume everything will work out fine if they die unexpectedly. But that's not the case all the time. Your loved ones might not be able to find out where your money is if they don't know, which could mean that their hard earned savings end up in the government rather than you and your family. And your family could be left to argue about who's going to get what, even if the assets are easily found. It is important to write a will so that everyone knows what you would have wanted. Your residuary estate is everything you own after any debts, bills and taxes have been paid and after the specific gifts you include in your will have been distributed. Examples of this are the following: bank accounts, pension funds, real estate, stocks and shares. And here are a few things that aren't included in your residuary estate: Pensions or life insurance policies written in trust: these go directly to the person you nominated when you took out the policy, so can't be shared out as part of your residuary estate. Joint bank accounts: they'll automatically be distributed to the joint owner when you die. Jointly owned properties: when a property is held by both tenants, it will go to the joint owner. If something unexpected happens to your husband, wills and trusts are helpful in making sure that the secondary beneficiaries are appointed. If you are divorced, make sure to keep beneficiaries updated on their accounts and life insurance policies so that they don't inadvertently pass the assets along to your former spouse.
Things to Keep in Mind When Choosing Beneficiaries
Bequeathing liquid assets to a person might adjust their income significantly, which could negatively impact the benefits they're currently receiving. To avoid disputes, it is necessary to ensure that the beneficiaries of your estate plan documents are in sync with those of different annuities, life insurances, retirement savings accounts and additional assets. In the case of leaving assets to children, adult children with questionable judgement or a disabled relative, it may be beneficial to set up trusts for your beneficiary. You may be able to make a trust the beneficiary of a retirement plan for tax purposes, instead of letting it become part of your surviving spouse's estate. You can leave specific assets to different beneficiaries in your estate plan, like leaving a specific piece of property to a child from a past marriage or a certain bank account to a grandchild.
Inheritance hierarchy
The inheritance hierarchy is usually as follows: the surviving spouse, followed by children, and then grandchildren, although the process varies from state to state. If none of those relatives can be identified, your assets could go to parents, grandparents, siblings, nephews, nieces or even the state. In lieu of state decision, people who do not have an heir may appoint a beneficiary for the purpose of transferring their assets. It can be a relative, friend, or charitable organization anyone except the attorney who drafted your will.
Unmarried and no children: What happens if you die intestate?
Many unmarried and childless individuals simply don't see the need for a Will. There are real consequences to this, consider the following scenarios: If both your parents are still alive, they will receive your estate in equal parts. That parent gets 50% if you've got only one living parent. The remainder will be allocated to the surviving parent's descendants. This can be your siblings, half-siblings, or step-siblings' even ones you didnt knew exists will inherit a portion of your assets. If both parents have passed away, the descendants of both your parents will inherit your assets. Again, it could be your brothers and sisters or stepbrothers. Your wealth will go to your nearest relative, in your blood type closest to you, if you have no parents and no siblings. If your mom/dad has a sibling or parent still alive, chances are they will inherit your entire estate. Also, your assets don't divide up. Your closest blood relatives get their full shares of the estate. So, if you have cousins and want them to inherit, you must draw up a Will specifying your wishes, as their parents (i.e. your aunts and uncles) will always supersede them.
Leaving wealth to Family
In the case of inheritance, families and cultures have different expectations. In spite of family situation, it is imperative to discuss different scenarios with those close to you. Let us know what you have planned and your intentions. The integral part of your financial planning is to have the right wills and trusts in place, but do not overlook often overlooked inheritance preparation or communication. If parents diverge from equally splitting an inheritance among their children, it can have severe consequences for the siblings. If siblings already have different income levels and deal with tensions that can arise from that disparity, an uneven inheritance amount can exacerbate those relational issues. If a brother or sister needs it, some parents will opt to make an offsetting adjustment. It is important to talk to your family before you do so if you have any concerns about the maintenance of good relations or prevention from further negative consequences.
In many years, it was the traditional practice to divide inheritance evenly between siblings. Nevertheless, the growth of blended families, second marriages and half siblings has led to a wide range of unique circumstances where an even split is not so easy. Your children and descendants have to understand that they're your legacy, not money or possessions, regardless of how you choose to divide the inheritance. To maximize your legacy, work with your children to contribute something to the community for the benefit of others regardless of the dollar amount you'll be leaving behind.
In my opinion, it is usually best to take some family dynamics into account. Usually, when one has a spouse, they're the primary beneficiary. However, what if there are children from a previous marriage or a sibling that the person is particularly fond of? It's necessary to balance one's familial relationships with the legal requirements of their state's inheritance laws. If one doesn't have a will, for instance, their state will likely distribute their assets according to the default laws, which may not align with their wishes.
When deciding how much each of their children will receive in inheritance, families can be influenced by different factors. While splitting an estate equally between all children is often the least controversial choice, an equal distribution may not accurately reflect your family circumstances. There's probably a reason you might want to give more than one child or another. Designating an equal inheritance is often seen as the fairest option, causing the least amount of anxiety and conflict among heirs. Divvying up assets equally makes sense when each child's financial situation, past support and opportunities are similar. The possibility of a child disputing his or her will is reduced by leaving equal assets. Equal distribution does not necessarily mean equitable distribution. If you've given more financial support to one child than others, it may make sense to give more to the less fortunate children. You can determine that there is a need for more financial support in the case of each child. Suppose, for example, you believe that one of your children has chosen a career path which will allow them to live comfortably while another may face more difficulty in achieving the same financial security. In this case, you may choose to leave more assets to the child with more apparent needs than the other. If one of your children has a mental or emotional disability and is not capable of providing for him/herself, it may make sense to provide additional financial resources to support that child. You may wish to convey your appreciation by leaving more assets if one of your children has made considerable time and resources in caring for you during his or her lifetime. Depending on the way in which your family has been merged, you may want to give more of your assets to biologically born kids over step children.
If you decide to leave different amounts to each of your children, be aware that choice may lead to hurt feelings or resentment. Consider communicating your wishes and reasons to children while you live if it is important for the maintenance of family harmony. This can help your children understand and hopefully accept your wishes and ensures no one is surprised upon your death.
If you don't want to leave your money to your family
You may not want to leave your money in the family for a number of reasons. You may have had an argument that's made you want to disinherit them, maybe you only have distant relatives and there are friends or causes you feel closer too, or you might simply feel that they're comfortable enough not to need your money. If you don't make a will, your money will automatically go to members of your family. So it's important to set out your wishes to make sure your estate doesn't go to the wrong people. If you don't want to leave your estate to your family or close friends, you may choose to include a charity in your will.
Do You Want Your In-Laws To Inherit Your Money?
According to the majority of people, a will or trust provides that if they die, their assets are going to be passed on to their children and then returned to their grandchildren. However, that only happens if your child dies before you. Hopefully, your children outlive you. If it does, the typical will and trust are going to transfer money directly to your children right away or when they're a certain age. Either way, once the child inherits the money, it is governed by your child's will or trust, not yours. That means that upon your child's death, the assets will most likely pay to your son-in-law or daughter-in-law and may pass on their death to someone else, such as a new spouse. It's okay with some people, but for others it might not be what you want. Many people would like their money to remain in the family. You'll need what we call the Bloodline Trust for that.
Leaving wealth to charity
Perhaps you've decided to donate a portion of your wealth to a charity but are concerned about your children or other relatives contesting the wills, estates, and trusts. The services of a lawyer will have to be used. If the owner of the estate wishes to donate to a charity after his death, children and spouses may attempt to challenge the will or trust. This tends to happen if the children believe that they are not receiving the amount they should be based on the estate assets.
Following death, it is customary to give assets to charity in a number of different ways, either as the primary or secondary beneficiary. Some methods may also assist in reducing a possible inheritance tax burden if you have taxable assets.
Make a charitable bequest. I think it's the easiest way to give your assets to charity. If you want to leave a certain amount or some of your accounts in favour of one of these favoured charities, simply say so. For example, in order to use the gift for an entity's general purposes or a more specific purpose you should specify whether it is designated charity of local chapter or broader organisation. In order to make sure that your wishes are met appropriately, your lawyer for estate planning may assist you in the writing of a request effectively.
Name a charity as an account beneficiary. In addition, an organization may be designated as beneficiary of retirement accounts and life insurance policies by leaving assets to a charity. It can help maximise the amount a charity is paid and also reduce value of your taxable assets, as long as this structure is set up correctly.
In order to ensure that your assets are distributed without dispute, it is important to clearly communicate your wishes to family members, regardless of the method of charitable giving. In order to ensure the fulfilment of your charity wishes, advance planning and a few hard discussions may be helpful.
Conclusion
In terms of determining who should receive your assets and money when you are no longer alive, there aren't foolproof handbooks that would help us make an objective decision. This is the decision that all people should be able to make for themselves. You may need to make some tough decisions depending on the assets and people you're interested in. Divorce, children from multiple marriages, grandchildren and their personal views on charity or inheritance can shape your life in a variety of ways. The most important decision is to determine who inherits one's lifetime wealth. There are a number of factors, from legislation to family dynamics and the taxation implications that must be considered. The best approach is to take into account the individual situation of each person, so it's typically advisable that one seeks advice from experts in order to understand what he or she should do. With careful planning, one can help ensure their assets go toward the causes and people they care about most, leaving a lasting legacy that reflects their personal values and beliefs.
