I have four sisters and brothers, and three have taken out loans against their share of any inheritance — significant loans, like in the $75,000 range. Dad has been tracking these loans and has provided in his will a formula for adjusting the split accordingly. However, he recently decided that these loans are to be forgiven and the estate split five equal ways.Dad hasn’t asked me for any input on this decision, so I’ve not offered any. But I’m a little upset by it.
Although you have every right to change your will as you see fit, be sure to consider the impact those changes can have on your heirs — both financially and emotionally. Also, take into account that as you age, you will be less and less likely to be willing to spend the energy to keep up various tracking accounts that seem so easy at first when you make loans to the next generation.
Estate planning attorneys normally advise their clients to communicate with their children about what kind of inheritance to expect and to even explain the reasons certain arrangements are being made. This approach can help eliminate the possibility that siblings will later fight with each other in court over their inheritances.
On the other hand, if the parents later decide to change their estate plans, then that can cause issues as well. And at the root of all of this is the expectation from almost every child that all children will be treated equally.
A recent column in the Washington Post, titled "Carolyn Hax: A late change to dad's will is causing resentment," is an example of just such a case.
A father planned to distribute his assets between his five children. However, three of those children had taken out loans against their inheritances. The plan, explained in the beginning, was that those loans would be offset against their eventual inheritance. As time passed and the father aged, the father changed his will to first forgive those loans at his death, and to then distribute whatever is left equally between all five children. As you might expect, the siblings who did not take out a loan from the father are feeling some resentment. They took care of themselves why should they contribute to their siblings’ excesses and mistakes?
A simple solution does not exist.
If you decide to change your estate plan after telling your children about the original plan, it will help to avoid conflict and suspicion if you tell all of the children about the changes. If they were expecting one thing and are surprised by something else after you pass away, family fights are almost guaranteed.
An experienced estate planning attorney and in fact an entire planning team can help you communicate your intentions, as well as provide ideas to avoid resentment over an inheritance among your children.
Reference: Washington Post (November 6, 2014) "Carolyn Hax: A late change to dad's will is causing resentment"