In our previous post, we began discussing how parents looking at giving unequal inheritances to their children need to consider the possibility that such arrangements may cause problems later on when they’re gone. As we mentioned, legal challenges to the validity of the will are always a possibility when a child feels he or she wasn’t given what they feel you would have wanted them to receive.
In addition to the suggestions made in our previous post, which largely focused on providing explanations outside your will for the reasons behind the inheritance disparity and demonstrating your capacity to make decisions regarding their estate, we’ll look here at a couple other approaches parents can take to inheritance.
One option parents have, instead of leaving unequal inheritances in their will, is to take advantage of lifetime gifting opportunities. Under current law, a parent may leave up to $13,000 per year to a child, tax-free. Parents may gift-split and give twice that amount to a child. Another possibility is to pay for health care or tuition costs. This is also a tax free option, and it doesn’t deplete from your annual exclusion amount for gift tax.
Another option that could work for some families is to give an equal amount of inheritance to each child and place the remainder of one’s estate in trust, to be used for emergencies. One would put a trustee in charge of making distributions.
Yet another option, for families that are prone to disagreement, is to draft serial wills over a period of months or years. In this approach, one would keep major provisions in place and only make slight changes to minor provisions. The reason this could be helpful is that it demonstrates that each time you reviewed your will, you kept the major inheritance provisions in place. A later challenge of the validity of your will would have to invalidate each of the wills in the series. Doing so would be expensive and time-consuming, and would provide a deterrent to any legal challenge. The cost of making minor changes to your will would likely far outweigh the costs and difficulties of later legal challenges to the will.
In addition to the above ideas, one could add a clause to one’s will requiring that any disputes be settled by mediation or arbitration instead of litigation. One could also add a clause which disinherits any heir who tries to challenge the will. These are often referred to as “no contest” clauses.
Parents who plan on leaving unequal inheritances to their children do well to speak with an experienced attorney to determine which strategies fit best into their particular situation.
Source: Wall Street Journal, “Wills: How to Give One Child Less,” Rachel Emma Silvernman, Sep 10, 2001.