So you mean putting the lower income child as IRA beneficiary but leaving the will as a 50/50 split of all assets? I’m unclear how this could be executed without repeated rewriting of a will? And couldn’t the kids agree later on how to divide up the assets tax efficiently? Or are you saying that’s infeasible because the IRA would be distributed way before the rest of the estate?
We are leaving everything equally. I can’t predict what my kids financial situations will be in the future. And much of that is due to individual choices. (I would make an exception if one child had a physical/mental health situation requiring continuing care). Likewise, when we die, the money they get will be their own to control and do what they want to.
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This. We have only one child, so how to split is irrelevant to us, but I would not base my legacy on the tax implications of where multiple kids live or what they do. Kids move; jobs, prospects, and life change. What each would potentially net from my equal distribution is not my problem to solve nor is it the intent of my gift.
Well said.
Cross-posted with @FallGirl. Concur.
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If one doesn’t leave things equally, in my opinion, one is causing a future issue and potential rift between siblings.
Not the gift I’d want to leave my kids…but that’s me.
Now, there are situations - like my sister lives with my dad. He owns the house. She lives there so I’d technically be part owner.
How we’d handle this - will she buy me out or live til she doesn’t and we sell it or whatever - I don’t know.
But I do know there would be zero risk in regards to her staying - it’s a place she’d love to live the rest of her life - i.e. I’m not going to be that guy who says - give me my half now or get out. My sister will be there, entitled to stay as long as she and her husband (2nd husband) want. We’ll figure out a proper scenario - whatever that looks at - in regards to an asset split.
I’ve seen others in this exact situation create a train wreck within the family - entirely ridiculous in my opinion. It’s your brother/sister - you’re going to let some money screw that up? For many - yes.
In the end, the family bond is more important than anything.
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My brother’s wife (20 plus years) filed for divorce and is getting half of everything- including his inheritance. Also, there’s alimony. So, did my parents figure that in? I’m sure not. I would not be surprised if in his will she is also the sole beneficiary.
I’m glad my parents did 50/50. We are still on talking terms.
I won’t lie when my bil got divorced after 30 years, the family was relieved that there wasn’t any inheritance involved.
She is amply compensated as even she would admit.
I think if you don’t commingle any inheritance, then it can’t be considered in a divorce agreement
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True. You don’t commingle the inheritance.
My inheritance will go to my kids (50/50) when I die, none to H. It is held in separate accounts under my name only.That doesn’t mean I can’t take money now and spend it on H, or for things for both of us (I do). But my parents specifically wanted the money to stay in the family and not go to spouses. H received a (much smaller) amount when his mom passed. I have nothing to do with that money, it’s his.
A friend’s parents had their estate set up so that their 2 children (both in their 60’s now) would inherent equally but if either child predeceased the parents, their spouse would inherent their share. Well the sibling’s spouse left them for someone else - after 40 years of marriage! Their elderly mother had to change the will in a hurry. Thankfully she was still mentally competent.
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Accounts with payable on death or transfer on death designations automatically transfer to the named beneficiary when the account owner dies. They are excluded from probate.
In your example the named child would get the balance of the IRA account plus 50% of assets not in TOD/POD accounts.
We’re in the process of updating our trust and are making what we leave to each kid become a new trust in their name only. That way the money is protected against divorce, and has other asset protection.
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We began gifting to our kids when they were toddlers. They are partners/shareholders in our investments. They know what they have and are also aware what’s coming later.
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Could be that those who get into arguments about one of multiple heirs living in the inherited house have issues where some feel that they need the money from the home equity, or feel that keeping the house is not a good financial choice (so they want to sell or be bought out), or they see the one living there as neglectful of house maintenance, property tax payments, etc. Not saying that it is a good thing, but it is not hard to think of things that can cause trouble in such a situation.
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I would never portion out inheritance unequally among my kids because of their current financial situation. What a way to ruin their relationship. Just because one kid is making big bucks and lives in a particular state today, doesn’t mean their financial situation and location won’t change tomorrow. One could marry someone who is a billionaire (fingers crossed), one could marry someone who takes him to the cleaners in a divorce. One could save and invest wisely, allowing for a high 401K decades from now, the other might not do so well. Health, children, mental health, lawsuits, addiction, no one can foretell the future, particularly if the reckoning could come today or 40 years in the future. My kids know that if there’s a penny left when everything is divided equally, they split it or throw it away.
Of course, if there are serious mental issues, drug addiction or a child with special needs, there would be a trust and it’s obviously more complicated.
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UCB hit the nail on the head.
I know several of these “sibling in the family home” situations. It is RARELY the non-resident siblings who are the source of the issue- it is usually the “Dad left me the house and I’m not leaving” sibling. Should the non-resident siblings take on the burden of property taxes, maintenance, utilities because without their contributions, the resident sibling can’t afford to stay? Should the non-resident siblings be forced to sell their share of the house at a loss and turn down an attractive, all cash offer from a non-family member (which would allow the resident sibling to buy a smaller house, or an equally large house in a less expensive neighborhood) because the resident sibling “doesn’t want to trade down my lifestyle”? Must the other siblings subsidize the resident siblings lifestyle for the rest of his/her life because “I gave up my job to take care of dad and now you guys need to take care of me”?
I’ve seen each of these situations. It is very sad. But don’t judge. You don’t always know the situation.
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I know two siblings where this happened and the non livinig in the house sibling wanted the house sold (wanted their money and the resident couldn’t pay them) - and this pair got attorneys, spent tons of money, and what’s the point? And their sibling bond - forever wrecked. It’s a shame, really.
One of my closest friends is in this exact situation. The family home was left to three sisters, the middle one has been living there for the last 30 years, has some physical and mental health issues and is not in the best financial situation. The youngest is in dire financial straits and could definitely use the money from the sale of the home. The oldest is the executor, financially well off, and is dragging her feet about dealing with the entire situation. 2+ years since the mom passed.
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Boundaries are important, even with – maybe more importantly – with family.
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Made it clear to my kids that we would pay for college (no matter where or how much) and they were off the payroll after that. Now that both have established their fiscal responsibility bonafides (both fully off our payroll after college), we have been gifting them the annual limit to allow them to maximize their Roth IRA/401k savings and start building a nest egg for a housing down payment. Also kept their 529’s in place that I am funding monthly for the eventual grandkids.
My wife and I have always lived frugally, so we are planning to leave a decent chunk to them or the grandkids (especially for education), but we plan to give with “warm hands” as much as possible.
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When my SisIL passed, she left everything to her 2 surviving brothers to share, without worrying about tax situations of each. (She was single abd had no spouse nor kids.)
One brother practiced dentistry with her and offered to buy out other brother’s share that he inherited from SIL but he said he was owed nothing and that brother deserved and got to keep running the practice as he saw fit.
Executor helped divvy assets up equally and the two brothers decided among themselves how they preferred the real estate to be divided. It was easier for all to ignore any tax implications and just do an even division.
Similarly in another family when there were 6 surviving adult kids (in their 50s-late 60s). Each got an equal share and individual tax situations of each recipient was ignored.
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I have a decent life insurance policy that will stay intact that will go to my kids if my wife passes first. We will have some sort of house/condo. And unless things change drastically there should be some left over.
The best gift I was able to give my kids was college with no debt. They couldn’t just go anywhere they wanted, but within reason. D2 jumped it and got a full-ride. Her 529 is just growing and will either be used for grad school or rolled into a Roth.
My wife and I didn’t get that. We had lots of loans and never got help from our parents with the kids’ college or anything. Going through that struggle with someone brings you closer together. My wife is my ride or die and will always be.
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