Relying on a will to pass along your wealth after you die may not be enough to prevent confusion and confrontations between your heirs. Instead, a well-considered estate plan can employ several additional strategies to clarify your intentions and set up a smooth transfer of assets to your beneficiaries.
Inheritance is no simple matter. Because family relationships are complex, and life circumstances for each person differ, it may be hard to divide assets in a way that seems fair to everyone. And in fact, more than two-thirds of Americans have considered dividing their assets unequally between their children.1 They may feel that someone who is living with a disability or facing other hardships should get more money. In contrast, they may be inclined to give less to an adult child who has already required "bailing out" due to his or her behavior, or to one who has achieved sufficient financial success on his or her own. Children who are raising children of their own may be treated differently than those who are childless. And many parents have a desire to reward one of their children who has taken care of them.2
Experts often caution that the best way to avoid future fights among heirs would be to ignore all of these differences and simply divide the estate equally. However, if you feel strongly that one of your children should receive more of your estate than another, you can take steps while you are still alive to reduce future animosity. Initiate candid conversations with your beneficiaries about why, how, and how much you plan to bestow on each of them. Even if you don’t get into the actual numbers, clearly articulating your reasons for treating them differently can help things progress more smoothly after you are gone. Writing down your plan and the reasoning behind it can ensure that it is clear to everyone when you are no longer around to explain it again.3
American families with significant wealth have a lousy track record of passing that wealth on to the next generation, mainly due to not having the kinds of clear, honest conversations that will not only inform the next generation about the estate transfer plan, but also involve them in the planning phase. Your heirs may have very different ideas about the value and desirability of non-monetary possessions such as homes, artwork, businesses, and family heirlooms. As these items cannot be divided equally, it is important to find a way to bestow them in a process that seems fair to the heirs. These decisions work best when potential heirs are in on the decisions and the reasons for them, and even get to express their preferences. 4
One way to handle the distribution of your personal possessions could be to have them appraised and hold a family auction on your death. The total value of the items can be split among your heirs, who can spend their portion bidding on the particular items they would like. 5
Rather than relying on a will to ensure that your estate is distributed as you wish, consider a revocable trust. Though it is a more expensive strategy to put in place, a trust is a better choice than a will for most people, for the single reason that it will make a future fight less likely. "If you want to change a trust, you have to file a lawsuit. If you have a will, you’re opening up a lawsuit by simply creating a will," explains Dan Peare, chair of the trust and estate departments at Hinkle Law Firm.6 Wills may be vulnerable to challenges if they contain imprecise language or lack in terrorem clauses to discourage challenges with the threat of disinheritance.7 A trust can also help you to divert assets from the probate process, which costs money and time and makes your financial affairs a matter of public record.8