Parents should set up their own estate planning so that after both parents’ deaths the estate property is held in trust for each child, not distributable outright. Why?
One, the trust set-up helps prevent the property from later being includible in the children’s own estates when they die for estate tax purposes. Thus, the children’s own estate tax can be substantially reduced.
Two, the trust can provide asset protection for the trust assets, far superior than if the property is merely distributed to the children outright (think divorce, bankruptcy, penny stocks, internet gambling, bad business decisions, etc.).
Here is a letter you can print and give your parents on these points.
I know. Many of you are probably thinking at this point that you simply cannot broach this subject with your parents. ‘We don’t talk about money in our family.’
And yes, the topic of money and estate planning in many families is often taboo, particularly in wealthier families. This family silence, unfortunately, can be very costly.