The question of how to cover estate taxes is a common dilemma in estate planning. With that in mind, one thing you may want to avoid is saddling one of your beneficiaries with the tax bill while essentially allowing another beneficiary to avoid estate taxes altogether. This situation could produce heart-rending conflict among your beneficiaries.
For example, if you name your eldest child as the sole beneficiary of your retirement plan, that child will, of course, receive those funds. But what if your younger child decides that the retirement money should be used to pay the estate tax? And what if your eldest child doesn’t agree?
Such a situation can be avoided by clarifying your wishes in your will, or by using another estate planning tool — a trust, for example — to fairly distribute assets to your younger child. A trust can also be useful in keeping assets out of probate.
As we discussed in a previous post, there are many options for developing a customized estate plan to meet your family’s specific needs.
However, when there are ambiguities in an estate plan, conflicts among family members can easily arise. At Hagel Lawfirm, we provide estate planning services, as well as estate litigation services. We have seen the benefits families enjoy when an effective plan is in place, and we have seen the distress that poor planning can cause.
For more on providing for loved ones or resolving estate disputes, please see our overview of legal practice areas.