According to the Pew Research Center, more Americans age 18-34 are living with their parents than in any other living situation. Over 32% of people in that age group live in their parents’ house which leads to an interesting estate planning dilemma for the parents.
While some adults who live with their parents are financially independent providing for their own daily living expenses and even paying rent, many living at home are in some way, shape or form financially dependent on their parents. This dependence can make estate planning even more important.
Discuss Your Plan
As with all estate planning, it is important that people in this particular situation discuss their plans and wishes with loved ones. Let your children know how your estate is set-up, who your executor is, and who will inherit certain assets. An open dialogue can prevent confusion and infighting when you are no longer around. Make your wishes clear. This conversation can be difficult to have, but it is vital to ensuring that your wishes are respected and carried out.
While it may be your instinct to leave the house to the child still living there, this may not be the most appropriate course of action. Consider the future burden the house could present. Will your child be able to take financial and physical responsibility for the home? Can they afford property taxes or mortgage payments? Will they be able to maintain the property in the years to come? The property may be their home, but it could create an undue burden to them later in life if they aren’t prepared to take control of it as an asset.
Financially dependent children may find coping with the death of their parents even more difficult than their financially independent counterparts. They are forced to deal with emotional loss as well as economic loss. Planning for this transition can help to ease the stress. Consider establishing a trust for your child’s inheritance. This trust can be set up to protect your child from themselves if they are financially irresponsible or tend to be a spendthrift. With this in place you can maintain some sort of control over the distribution of your assets long after you are gone.
Remember that equal is not always fair and your estate plan is your decision. There are a number of reasons one may choose to unevenly distribute their estate. If you have made loans to one child but not your other children, you may choose to address these loans in your estate plan.
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The Danger of Unrestricted Bequests and Gifts
Planning Your Marriage and Estate Starts With A Prenuptial Agreement
Future Federal Estate Tax May Look Different Depending on our Next President