Dear Quentin
My husband and I have been retired for seven years. We got good jobs, saved money, and now have some financial security. We downsized from a four-bedroom house to a two-bedroom house and from two cars to one. We purchase a prepaid cremation plan and continue to save wherever we can. Several years ago, we drafted a will with our attorney and placed the appropriate assets in a revocable trust.
Most Read on MarketWatch
It seemed like we were all ready to enjoy our retirement lives. right? However, the son was having financial problems. He joined several promising startup companies. However, startups are not always successful. He had a wife and young daughter who needed his support. Having no means to feed them, he turned to his parents. When we agreed to help by giving him his $100,000, we understood that this debt would be repaid with a share of his inheritance.
He now has a regular job and no longer needs our help. How can we record this debt fairly in the will and take into account that he is not the only beneficiary? We can simply deduct it from his inheritance and if his debt is not Will it ignore the fact that the beneficiaries would have received a larger share of the inheritance? Once you have determined your equitable distribution, how do you include it in your will?
california mom
Related: “I’d rather wear a potato sack”: I’ve been a bridesmaid in three weddings. The brides chose ugly dresses and I am obligated to pay. Should I say no?
Dear MIC
You have the right to enjoy a peaceful and guilt-free retirement.
Your plan should be two things: 1) Be transparent with your son and let him know what you are planning. Of course this isn’t necessary, but it can help ease the hurt feelings after you’re gone, and ideally it can give him time to get used to the idea of inheriting X instead of Y. Masu. The more honest and respectful you are about different inheritances, the easier probate should be, as all kinds of dysfunction in the family can surface.
and 2) Be as specific as possible in your will. Please include why you do not want to leave the same amount to your children. This could be because one child is better off than the other, has unstable housing, has a chronic medical problem, or simply because of favoritism. It will be considered. There is a difference between “equality” and “fairness” and no one has the right to receive anything from their parents. It’s your money and your choice to distribute it as you see fit.
You can also leave instructions in your will. These are often used to detail issues as diverse as life insurance documents, bank statements, income tax return listings, and how to distribute personal items. However, you can also elaborate on your reasons for leaving one child, X, and her other child, Y. You may also include a “no-objection clause.” If an heir contests the will and loses the case, heirs lose their inheritance rights.
There is no right or wrong way to write a will, as long as you are clear about your intentions and get the help of an experienced trust attorney. Each last will and testament is unique. For example, if a parent loses a child, they may choose to leave a portion of the deceased child’s inheritance to the child’s children. You gave your son financial help when he needed it most, and I believe he will understand that eventually.
Next, there are legal considerations. Like many family loans, family loans are not registered as standard loan agreements, so it is important to prepare for this now. This means that the money you gave your son is probably a gift from a legal perspective. California does not have a state gift tax, but a federal tax does exist. You can gift up to $18,000 in cash or property without recording the gift on your tax return.
There are good reasons to record a debt so that it is not considered a gift. According to BPE Law Group, “If an heir or beneficiary owes money from the deceased, they need to find a signed acknowledgment of the debt or an agreement to set it off against the beneficiary’s share of the estate. There is.” “Similarly, there can be significant income tax implications when debts are forgiven or written off.”
If there is no record of the money you gave to your son and you left him $100,000 and your other children $200,000 each, he could contest the will as a direct beneficiary and the children may claim that he forced you to leave your sons. That’s more money than you left for your son. You might think it’s impossible, but people do the strangest things when inheritance involves large sums of money.
Case in point: This letter was almost the opposite of your dilemma. The son in question, who was living in a nursing home at the time he wrote to me, said he was upset that his late mother had actually proactively deducted her living expenses. I did. A debt owed to her from his inheritance. In that case, he borrowed his $20,000 in 1996, but only repaid his $5,000 of it in subsequent years. As he told me, “I need all my inheritance.”
Money should be a gift, not a burden. Enjoy your freedom.
Previous columns by Quentin Fottrell:
“He was recently taken to the hospital”: An elderly neighbor gave me power of attorney. Can my estranged daughter object?
“He stopped talking to me”: My 83-year-old father suffers from hoarding disorder and dementia. How can I help him and protect his property?
‘Punishing myself won’t help’: My credit card was stolen – the thief revealed many nasty surprises about my financial situation
