Jennifer M. Johnston, CTFA

All families have their own dynamics. Some families have children who fall into similar levels of economic stability, while some families have children who are all unique and have a wide range of financial and personal success that result in different abilities to care of themselves and their families in the way they may have been accustomed to growing up or the way you may want to see.  

How do parents approach this when it is time to prepare or review their estate planning documents? First you need to decide if this is an issue for you. If your children are equally capable of taking care of themselves and have the equal ability to do so then this may be a moot issue for you.  

However, if you have one child who is a successful attorney, another child who is a successful preschool teacher, and another who struggles with addiction and holding down a job you may have some things to consider when it comes to an equal or unequal inheritance amongst your children. 

An unequal inheritance may also be thought of as an equitable inheritance.  Where an equal inheritance beneficiaries receive the same share, an equitable (or unequal) inheritance beneficiaries receive what is deemed fair by the Grantor given their individual circumstances. Of course “fair” is discretionary and where the complexities start and emotions can run high if the inheritance isn’t dealt with properly.

Here are some common reasons why an unequal/equitable inheritance may be considered by parents:

• Special needs
• Addiction
• Difference in earnings
• Gifts given during lifetime 
• Stepchildren
• Sibling with more children
• Legal issues
• Grandchildren
• A child providing care to the grantor during life
• Differences in cost to live in a certain area
• A younger child who hasn’t completed their education or established a career

If you decide that an unequal or equitable inheritance is right for your situation the most important things you can do, aside from updating your estate planning documents, are to communicate and document your decision with your beneficiaries.

Communicate: Communication with your children is essential and the sooner the better.  Or if you find yourself on the flipside and are a beneficiary set to receive an unequal share think about gently bringing up the subject in order to understand why this decision has been made before your loved one is gone. 

Communication, regardless who initiates it, should be priority number one if your estate is not going to be divided equally.  (It is also a good idea to discuss your estate plan with your beneficiaries if you do plan for an equal division as there could be concern the division should be unequal/equitable given each beneficiaries unique situation.) An open discussion will help everyone understand where both parties are coming from.  Emotions may attempt to take the driver’s seat during the conversation so going into it with compassion and understanding is a good mindset to remind everyone to strive for.

Document: Once everyone has been involved in the discussion, whether everything is agreed to or not it is extremely important that everything is clearly documented. Some of the details to document include:

• Date of the discussion.
• Names of who were present.
• Details of what was discussed.
• Reasons why the inheritance will be distributed in unequal shares must be well documented.  The same is true if you are going to make equal shares but there are concerns loved ones may think unequal/equitable shares should be distributed.
• Note and make it clear the Grantor(s)/Trustor(s) are of sound mind at the time of this discussion. 
  • Your estate document should also make clear that at the time of this discussion and the execution of any legal documents that contain this decision the Grantor(s)/Trustor(s) are making a conscious decision and are under no duress.
• If possible obtaining signatures from all of the attendees. This can be a valuable document to include with your trust or will and may even be referenced in your applicable document.  

If the aforementioned steps are not taken to document a discussion was had with the entire family (including everyone who is receiving and/or may be excluded from a class of individuals who is not receiving anything) there is a higher probability the document (will or trust) may be contested or challenged in court. This is an expensive and stressful process for all involved and most certainly not what any parent wants to leave as part of their legacy. 

Speak with your attorney about including a “no contest” clause in your will or trust. A no contest clause is basically a “you get nothing” clause if you challenge the inheritance you are to receive (in some states this only applies if there is no probable cause). This clause is meant to deter someone who is receiving an inheritance they do not agree with from seeking legal action. Sadly it may do nothing to keep someone who has been excluded from an inheritance from taking legal action as they have nothing to lose from suing the estate or trust.

While HTC cannot offer legal or tax advice we love being a part of your team to work with you and your attorney and CPA to help make your estate plan the best one for you. If you are in need of a referral for an attorney or CPA we would be happy to provide a few for you. We look forward to connecting with you soon!

Whether you have a last will and testament or not, your estate may have to go through the probate process. Probate is the legal process to administer and settle the estate of an individual who has passed away. When a person dies, their estate consists of assets, both real and personal property, they own on their date of death. It also includes the decedent’s debts, final expenses, and unpaid taxes. Somebody needs to be in charge of an estate to settle the affairs on behalf of the decedent.

To understand who a trust officer is and what they do first requires that you understand what a trust is. Here’s a quick review: A trust is a vehicle used to hold property. A trust can hold the title to anything (like art, vehicles, and even pets!) but the most common assets in a trust are investments, real estate (residential, commercial and farmland), and sometimes partnerships and LLCs.

Trusts are established by someone known as a grantor/trustor who wants to establish control of these assets during their life and after they are deceased. There are various reasons for this control. Sometimes it is due to estate and tax planning but almost always there is an underlying desire to protect the assets for the trust’s beneficiaries, those who will benefit from the trust once the grantor is gone.

Trusts are managed by a trustee, who in turn is a fiduciary. A fiduciary must follow legal and ethical standards that binds the trustee to make decisions in their client’s best interest and provides the highest level of care a client can receive. A trustee’s responsibility is to safeguard the assets of the trust and ensure they are managed according to the terms of the trust document, while following current state and federal laws.

Oftentimes when I am meeting with clients, we spend a significant amount of time focusing on fully understanding their personal and financial lives. This allows us to make sure that we can holistically address all of their needs, goals, and dreams for the future.

During this process, we discuss in-depth the best ways we can customize a plan to make it all happen.

Two of the most common questions I hear from clients are: 1) What is the difference between a trust and a will, and 2) Why it is important to document my wishes to best care for my family?

Simply defined, a will determines how your assets will be fully distributed after you die; a trust is a legacy to your heirs. Your trust details how your assets will be held and managed for the benefit of your heirs at your direction.

There are many different kinds of trust, each having its own focus and determined impact and benefit.

If you’ve been named as an individual trustee, it’s often considered an honor. However, you
now have significant responsibilities to the current and future beneficiaries of the trust,
which may feel overwhelming. Some of your duties as a trustee are to administer the trust
in accordance with the terms of the agreement, invest the trust assets, keep accurate
records, make sure the taxes are filed, and process distributions to beneficiaries. Plus, you
are responsible for managing the family dynamics of the trust beneficiaries.

One way to alleviate the pressures of your trust administration duties is to partner with a
corporate fiduciary in the capacity as an Agent for Trustee. Working with a corporate
fiduciary allows you access to professionals who have knowledge, experience, and
expertise in trust administration and investment management.