How family dynamics can complicate estate planning

Many families have dysfunctional dynamics that can make estate planning difficult, and in families with high net worth, the stakes can be particularly high. However, the basic advice that experts give for high net worth families can apply to most other situations involving estate planning well. The best way to get the outcome a person wants is with a combination of careful planning and communication.

Conflict between siblings is one source of problems, and in some families, it may help for each sibling to have a different financial advisor. However, parents should still explain their aims and reasoning to their children. It is usually best to leave something to each sibling instead of disinheriting one or more entirely. Letters of intent explaining the disparity in inheritances or a clause that disinherits an heir may deter lawsuits. Parents may want to name corporate trustees instead of making one child a trustee.

Most families are aware that they should make sure all the children are taken care of appropriately in a blended family. Letters of intent can be helpful here as well. Trusts can help protect wealth from friends and spouses of heirs or from irresponsible heirs themselves. A trust could also be used to protect a surviving spouse from children who might seek a conservatorship to get the parent’s assets.

People with complicated family and financial situations may want to discuss those situations with an attorney and their options. It is important to understand all the tax and other implications of passing on wealth. For example, in families that have some assets they want to pass on but not enough to fully support a loved one with special needs, a special needs trust can be created that does not affect the government benefits that individual may receive.

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