INTRO: In Part One of this series, we talked about why parents usually try their best to treat their children equally and children tend to expect that. Today Rob explains how an estate planning attorney can help aging parents evaluate the circumstances and navigate reasonable solutions when a child becomes a part-time or full-time caretaker.
Child Caretaker. Not infrequently, a child becomes a part-time or full-time caretaker for aging parents. In doing so, the child may make substantial personal and/or financial (e.g. employment/career) sacrifices. An estate planning attorney can help parents evaluate the circumstances and navigate reasonable solutions. Again, documentation is critical.
Parents should consider working with their estate planning attorney (and accountant) to draft an appropriate contract under which the child is paid a reasonable wage for the care taking. If a parent has insufficient liquid assets to pay the child or if the child refuses to take any pay, the parent may wish to include in his or her Trust a cash gift to be made (or a slightly higher percentage of the assets) to such child upon the parent's death. If the parent does so, it is often helpful if he or she articulates in the document the reason that the children are being provided for unequally. The other children may not like or agree with the stated reason, but at least they will understand why the parent believed the unequal treatment to be appropriate and fair.
Other critical estate planning decisions may be perceived as "unequal" but may be necessary or desirable, such as: i) holding funds in trust until an older age for some children than others; ii) choosing one or several children, but not all, to serve as successor trustee of the parent's Trust; iii) designating certain specific assets, such as real estate or family owned business interests, to be distributed to the child(ren) who happen to be involved in such real estate or business operations.
Attorneys don't have all the answers, but one of their most valuable functions is to know what questions to ask and how to guide their clients to answers that work best for the clients and their loved ones.
This article is intended to provide information of a general nature, and should not be relied upon as legal, tax, financial and/or business advice. Readers should obtain and rely upon specific advice only from their own qualified professional advisors. This communication is not intended or written to be used, for the purpose of: i) avoiding penalties under the Internal Revenue Code; or ii) promoting, marketing, or recommending to another party any matters addressed herein.
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