For parents, it can be close to impossible to sleep soundly knowing that your children are not financially stable, whether they are toddlers or grown-ups. This is why you need to start thinking about estate planning, which should not be taken lightly. Estate planning is important because it prevents your assets from ending up with unintended beneficiaries and mitigates family conflicts after you are gone.

Here are some useful tips for estate planning.

Communicate Openly with Your Children

It is common for children to underestimate or overestimate the total value of their parents’ estates. Talking to your children about your estate not only gives them a sense of how much they stand to get but also gives them peace of mind. Furthermore, it can reduce family conflicts when the time comes. Discussing inheritance with your children can help you solve issues that might otherwise prevent the proper distribution of your assets. This would also give you a chance to explain your decisions.

Level the Field

If you have several children, you are probably wondering if they should all get equal amounts. If you wish to minimize fighting after your passing, it might be a good decision to give each an equal amount. This does not just mean in terms of assets but also in terms of responsibilities. Under certain circumstances, it can be impossible to leave an equal share. Instead, focus on equitable inheritance. Equitable inheritance means that each child receives a fair amount, given their unique circumstances. For example, if your youngest child has yet to attend college while the others have already graduated from programs where you footed the bill, you might allocate more money to the youngest so that they have the same educational opportunity. The same logic might apply if you gave one child money for a down payment on a house; instead of just dividing your assets, you could deduct the amount of the down payment from that child’s inheritance. 

Distribute Your Estate Yourself

One common mistake parents make is leaving their eldest child as the beneficiary and giving them the mandate to distribute the estate. Estate planning attorneys don’t recommend this approach, as it can cause conflict and negative feelings among family members. To avoid fighting, do the distribution yourself. Make a list of everything you own and clearly indicate who actually gets what and the method to be used to distribute what is left.

Eliminate Uncertainties by Creating a Trust

Often, people choose to leave their children’s inheritance to them outright, either immediately or at a specific age, such as 25 or 30. However, once your child receives their inheritance outright, it is legally considered their property and will automatically become subject to creditors’ claims, including to any spouse during a divorce. That is why many estate planning attorneys recommend that you create a trust instead.

It is possible to structure a trust in different ways or even to ensure the trust lasts the child’s entire lifetime. If drafted properly, then this lifetime “dynasty trust” will create an asset protection barrier between the child and the child’s creditors. Trusts also keep your estate out of probate court, saving you (and your heirs) both time and money. In addition, trusts can minimize the amount paid in estate taxes. 

Regardless of what you choose, you’ll want to discuss your plans and intentions with a good estate planning attorney. Remember, you are ultimately responsible for the successful transfer of your estate to your beneficiaries.

This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.