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Equal Shares for Heirs? Not Unless You Take Taxes into Account

I don't think it's a bad thing that the kid with a lower income ends up with a higher payout. They likely need the money more. Despite similar upbringing, no two children land in exactly the same place.
 
Patri said:
I don't think it's a bad thing that the kid with a lower income ends up with a higher payout. They likely need the money more. Despite similar upbringing, no two children land in exactly the same place.
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That is fine, but my advice would be to make sure and discuss plans for unequal inheritance with the children and make sure everyone knows the reasons it is being dived that way. IMO, unequal shares often lead to issues with siblings after the parents are gone.

For example, my Mom rarely talks to her brother or sister anymore, and it is sad. There were four siblings, and they grew up on a farm. Her brother and one sister (with her husband) lived close by their parents and were all farmers. When my grandfather retired, those two took over farming his land. After my grandfather and grandmother passed, the will my grandfather set up stated the two sisters (including my mom) would receive $50K each, and the other two (who lived close) would each receive 1/2 of the land (160 acres each). That land is worth between $5-7K per acre, so do the math. Lots of hard feelings and very little speaking since then. After that, my parents (who were also farmers) made a point of making sure their will specifies equal shares for my siblings. There are ways to make sure farm land stays in the family (if someone wants it) and still have equal shares. How my grandfather handled it was terrible, IMO. And honestly, I lost a lot of respect for him due to how he set up the inheritance.

Kurt
 
I'm not planning on unequal inheritance. Our kids' tax brackets is their affair. I agree what your grandfather did was wrong. Did he have favorites?
 
Patri said:
I'm not planning on unequal inheritance. Our kids' tax brackets is their affair. I agree what your grandfather did was wrong. Did he have favorites?
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Not that I know of, but I was in middle school when he passed so I didn't know him as an adult. My grandmother passed when I was in college. She could have changed the will, but decided not to do so. Deciding the inheritance based on proximity of where your kids decide to live seems so wrong, but it is what it is. Too bad it resulted in so much bad blood in the family.

Kurt
 
PigsDad said:
Not that I know of, but I was in middle school when he passed so I didn't know him as an adult. My grandmother passed when I was in college. She could have changed the will, but decided not to do so. Deciding the inheritance based on proximity of where your kids decide to live seems so wrong, but it is what it is. Too bad it resulted in so much bad blood in the family.

Kurt
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Maybe they helped out more? Possibly farm prices increased between the writing of the will and when it came into play?

Probably would have been better off to leave it all to charity. No one could disagree and get upset with that.
 
am1 said:
Maybe they helped out more? Possibly farm prices increased between the writing of the will and when it came into play?
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The values were not even close -- approximately an order of magnitude difference at the time. Like I said, a very poor way to write a will.

Kurt
 
To avoid any misunderstanding I distributed all my assets to my kids and ex-wife right after I retired 20 years ago. Although this was done unevenly there was zero animosity because I was around and open with all as to why I was doing what I was doing. When I come into extra cash because my Pension throws off more cash than I need, I help out my kids according to their needs. Again there is zero animosity about this because but I am an open book with what I am doing. A benefit with doing it my way is that how I divvy things up is determined real time, not based on a will written 20 or more years earlier...

George
 
Well, our Estate Planner once said that your goal should be that the check written for your final expenses bounces! :) He meant that our retirement savings was for us to use. Our children know that we earned this money and not to expect a huge windfall when we die. Neither of our parents had a lot to leave their children and we did not expect it. We were able to retire at 55 and have thoroughly enjoyed it. Our money is in an IRA that we rolled our Profit Sharing into. All the money is taxed when we take it out. We also had a pre-tax account, but it lost so much in 2000, 2008 and 2013 that we finally cashed what was left out and put it in our vacation savings account. We are still taking $3000 per year as Capital Loss on our taxes.

We have helped the boys out over the years, plus paid for college so that they did not have student loans. We have tried to keep that equal. One of the boys has been more financially successful than the other, but he also works harder. He would be the one to step up if we did need anything. He has been helping his wife's parents now that his MIL has had to go to Assisted Living. We would not want to shortchange him. We have thought about asking him if he would prefer that his 50% go to his son who is now 20.
 
We were all pretty much in agreement that our parents money went to one sister. The problem is that all the belongings went to her too and she will not part with anything. She almost had a nervous breakdown when we got rid of my mothers clothes (my mother was 94 so they were not fashionable) and needs to move but won’t leave anything behind so stays put surrounded by all this stuff.
 
I thought inheritance was only taxable if over a certain amount (in the millions)?
 
Our sons are equal beneficiaries one day, hopefully far in the future. When we purchased our DVC points, we split them into 2 equal contracts, easy!
 
pittle said:
Well, our Estate Planner once said that your goal should be that the check written for your final expenses bounces! :) He meant that our retirement savings was for us to use. Our children know that we earned this money and not to expect a huge windfall when we die. Neither of our parents had a lot to leave their children and we did not expect it. We were able to retire at 55 and have thoroughly enjoyed it. Our money is in an IRA that we rolled our Profit Sharing into. All the money is taxed when we take it out. We also had a pre-tax account, but it lost so much in 2000, 2008 and 2013 that we finally cashed what was left out and put it in our vacation savings account. We are still taking $3000 per year as Capital Loss on our taxes.

We have helped the boys out over the years, plus paid for college so that they did not have student loans. We have tried to keep that equal. One of the boys has been more financially successful than the other, but he also works harder. He would be the one to step up if we did need anything. He has been helping his wife's parents now that his MIL has had to go to Assisted Living. We would not want to shortchange him. We have thought about asking him if he would prefer that his 50% go to his son who is now 20.
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I like your Estate Planners "goal", lol! Gave me a good chuckle this morning. :D Great for you, retiring at 55, awesome! So many kids are saddled with heavy student debt, so hard to get out from under. We also educated our boys so that they graduated with no student loans. Feel very fortunate that we were able to do that.
 
VacationForever said:
This article refers to IRA accounts. All IRAs disbursements are subject to taxes.
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There are ways to roll over those funds to delay taxes. I have no idea what my 2 kids tax rates will be years after I am gone. Personally if you are worrying about your kids tax rates for inheritance you are overthinking it.
 
bluehende said:
There are ways to roll over those funds to delay taxes. I have no idea what my 2 kids tax rates will be years after I am gone. Personally if you are worrying about your kids tax rates for inheritance you are overthinking it.
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For inheritance, non-spouse has the option of taking out in a 5-year installments or throughout their lifetime, based on the Lifetime Standard % for RMD. Non-spouse has to start withdrawal immediately regardless of which option is chosen.

For spouse, they can simply roll the inheritance to their own IRA and do not need to start until 70.5, as in RMD rules.
 
VacationForever said:
For inheritance, non-spouse has the option of taking out in a 5-year installments or throughout their lifetime, based on the Lifetime Standard % for RMD. Non-spouse has to start withdrawal immediately regardless of which option is chosen.

For spouse, they can simply roll the inheritance to their own IRA and do not need to start until 70.5, as in RMD rules.
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Here is a good article from Schwab on IRA inheritance

https://www.schwab.com/public/schwa...rstanding_iras/inherited_ira/withdrawal_rules

And here is one for 401k's

https://www.fidelity.com/viewpoints/personal-finance/401k-inheritance-tips
 
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As a young buck at the age of 33, my parents are still living (praise the Lord for every day), they have made inheritance very clear: don’t expect anything.

My father has 1/5 share in 100’s of acres in which he deeded to my brother a few years back so the bank can’t access it in the event of large healthcare bills. Siblings have access to the land/cabin. I’m not afraid my brother will lock us out once my parents die.

Even if I were to get an inheritance, I would offer it up to help my sister who struggles more financially than me or my brother.

I’m thankful to have been blessed by the Lord to not have a greedy heart. Greed is the opposite of living in my eyes.


Sent from my iPhone using Tapatalk
 
bluehende said:
There are ways to roll over those funds to delay taxes. I have no idea what my 2 kids tax rates will be years after I am gone. Personally if you are worrying about your kids tax rates for inheritance you are overthinking it.
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Yah!
 
bogey21 said:
Good for you. I see a big difference in helping kids while one is alive vs leaving them a pot of gold...

George
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I have a former co worker who is now about 75. His daughter and son in law were spoke about their plans to remodel their kitchen. He is quite generous, he replied "Consider it done". I want you to enjoy our assets now. He is in a good financial position to do it, so I thought that was fabulous!
 
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