Question: My wife and I have completed our estate plans and we will leave everything equally to our two children. One child is independent and rarely needs our financial help, the other girl often needs help. We have helped save her home from foreclosure on several occasions and have provided her with other financial support as well. Since our goal is to leave our estate to them equally, what is the best way to ensure that the money we now give to a girl goes into this “equal” distribution later? Do we need to put something to this effect in our will?

Reply: Your objective is to have your two daughters benefit equally in the distribution of your estate. You want to be sure that the advances you make to your daughter now will be used to reduce her share when the time comes to distribute your estate later. There are several ways to make this happen. To make it easier to answer your question, let’s say your “needy” daughter is Mary and your other daughter is Kate.

One way to make sure your daughters are treated equally is to include in your will or trust a statement that all funds you give to either child during their life will be considered as advances on their inheritance and will serve to reduce their share of your estate. This is called “membership”. My term includes the two girls, but since you are only helping Mary, you can make it specific to her.

The most important thing about using this kind of language in your estate plan is to make sure you keep good records of all the amounts you advance and communicate this information to your trustee in a clear and concise manner. Without clear records of the amounts advanced, your trustee will either have to guess the amount advanced, rely on Mary (or Kate) for the amounts advanced, or your trustee will have to search bank documents to attempt to establish the amount. As you can guess, none of these options are optimal.

The memory of Marie’s advances may disagree with that of Kate and cause conflict between your children. Finding bank documents can be time consuming and in some cases difficult. As a trustee, I am currently requesting bank statements from a deceased client and the bank is opposing my request stating that I have no right to the information! I believe I will win, but it will involve the assistance of a lawyer.

Likewise, if you make loans to children during your lifetime and intend that any outstanding balance be used to reduce their share of your estate, you should inform your trustee of the amounts loaned, the amount repaid and the interest accrued. . In a loan situation, I always recommend building a promissory note and keeping a clear record of the repayment.

Clear records of funds advanced or loaned will make your trustee’s job easier and help avoid conflicts between children in settling an estate.

Readers: In last week’s column on trust contests, I wrote that a bank trustee filed for a contest in a case he is the interim trustee. The bank’s action in this case was a request for a court hearing, not a competition. A trustee cannot file a dispute in a case in which he is a trustee, but he can ask the court for help in determining the validity of certain questions.

Liza Horvath has over 30 years of estate planning and trust experience and is a Chartered Professional Trustee. Liza is currently President of Monterey Trust Management. This is not legal, tax or investment advice. If you have a question, call (831) 646-5262 or email [email protected]


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