Like other young Arizona families, you might not think that you need estate planning yet. Wills and trusts are just for older people, right?
Actually, estate plans are for every adult, and become crucial if you have children and will inherit significant assets from your parents. Providing for children is often a big motivator for people to create estate plans, and parents want their kids to receive the greatest benefit from their inheritances, which means that reducing or eliminating taxes is important as well.
Keep three things in mind when considering multi-generational estate planning
In order to know what assets will be available to pass on to your children, you need to know the following:
- What assets constitute your estate now and in the future
- What you will inherit from your parents
- How your parents’ estate plans are structured
In order to get the big picture, you are going to have to plan a serious discussion about the future with your own parents.
Why is it so important to know what my parents have planned?
Understanding how your parents have structured their estate plans can have a direct effect on how you structure yours. Consider the following two scenarios if you will inherit your parents’ estate directly:
- If you have enough of your own wealth, you could structure you estate plan to pass on the assets of your parents to your children. You could refuse your inheritance by executing a qualified disclaimer, which alleviates the tax burden for you from your parents’ estate. If your parents name your children as successor beneficiaries, the assets would then pass to them.
- If you decide to use your inheritance to provide for you and your family, you could continue to build your own wealth to pass on to your children.
In either scenario, you are providing for your children. The question is which option will provide the most benefit and least tax liability to you and your children.
How do I talk to my parents about this without sounding greedy?
Regardless of how you approach the subject, diplomacy is essential. No matter how close you are to your parents, they might be hesitant to discuss their financial situation with you at first.
If you let your parents know that you and your spouse are creating estate plans and want to be sure that they are structured to provide the most benefit to your children, they might be more willing to discuss their finances and estate plans with you.
You could ask them to be a part of your discussions with an estate-planning attorney so that he or she can offer you the best options for your circumstances. Every family is unique, and the more information your attorney has regarding the entire financial picture, both current and future, the more tailored your plans can be.