Stoke That Sibling Rivalry
If you’re thinking about estate planning and what you will leave for your children, here’s a novel, but important, idea. To make sure they each get the same amount after taxes, leave them unequal inheritances.
This is because each child likely faces a dramatically different tax regime and as a result, their inheritance will be taxed very differently. Consider that when you inherit an investment account, you also inherit the tax liability that comes with it, which is largely influenced by your own financial situation.
The devil is in the details, but consulting your tax advisor with the idea that you want your children to enjoy the same after tax inheritance is an important first step.
This approach raises one of the most critical, but widely disregarded, pieces of estate planning advice: Talk to your family before you depart to tell them your goals and intentions and what they can expect, especially if, when your will is being read, each child learns they may be getting more or less than their siblings.
David R. Evanson is a financial journalist in Philadelphia.