Business & Finance Finance

Provide For Your Heirs But Let Them Live Their Own Lives

Estate planning allows you to decide how to provide for your loved ones after you die with what you've accumulated. And, you want to transfer your assets to those you intend efficiently. But be sure to transfer your wisdom to them and not your power over them. That's part of estate planning, too. Here are some points to consider...

- The assets you have that will go to your heirs.Your assets are transferred various ways including by:

* Joint ownership in properties

* Beneficiary designations in your life insurance, annuities, and qualified plans

* Gifts you give during your life

* Trusts you create of various purposes

* Your will or by intestate if you have none. Your will controls only probate assets - i.e. assets in your name only and don't have a beneficiary assigned as in your IRA, life insurance, annuity, and brokerage account, or under joint ownership.

Your first concern is to make sure that what you chose of your assets goes to the correct beneficiary or his alternative if he dies. So, update all your beneficiaries and your will with changes that will occur over time.

Next, plan an efficient transfer of your assets. By that I mean arrange to avoid unnecessary taxation of your assets by taking advantage of all available estate and gift tax exemptions and exclusions. You can accomplish this by using a by-pass trust, generation-skipping trusts, and generous use of your annual gift exemptions while you're living.

Try to make it clear to everyone, if possible, what you intend to give each of your beneficiaries for assets that pass through or outside your will. Be sure to coordinate all documents supporting your assets and their beneficiaries and letting your executor know where to access them all.

- Now, Transfer your wisdom and not so much control:

Often when a lot of money is at stake, there's a tendency to over control the distribution of assets to adult children. Naturally, parents don't want their kids to be spoiled with too much inheritance. So how can that be handled?

You can use incentive-type trusts that are designed to motivate children to achieve more - like requiring high grades in college or else a limited inheritance. But that can often be overdone too. Some parents may even try to control children already in their 30s, 40s and 50s.

In trying to control their kids too much, parents fail to add flexibility in their trusts to accommodate unforeseen circumstances - such as a brain injury - that could impair a child's achievements. Or, they could fail to recognize a child's fundamental desire to choose a life different from what his parents aspire for him. Don't put you kids in a straight-jacket.

It may be wiser to spend your effort not in controlling your adult children from the grave but imparting your wisdom on how money might be squandered by them. Warn them of what can happen - especially when they're in their early adulthood. But then let them handle the money you give them as free adults.

Let your children's life and fortunes be in their hands. For better or worse, they'll appreciate your help for letting them enjoy your wealth without giving up their own responsibility for themselves.
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