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Recently, in working with a family preparing their estate plan, an important guideline was discussed.
In your estate plan, use percentages rather than specific amounts for distributions out of your estate. For example, a family with a six-figure net worth specified a $5,000 gift to four charities and designated 33% of the remaining estate to go to each of their four children. The anticipation was that a six-figure inheritance would be available for each child.
However, end-of-life expenses resulted in a huge decrease of the net financial worth of the estate. As the estate was settled, the declared amounts (the $5,000 to each charity) were distributed first. Then, after the $20,000 was distributed to the charities, each child received 33% of the remaining $7,500 (or $2,500 each), which was half of what each charity received. This was far from what the parents intended.
Mixing specific amounts and percentages is an often occurring “mistake” in estate planning. If all distributions were listed by percentages (for example, 3% each to the four charities and 22% to each of the four children), the intent of the parents would have been more closely achieved regardless of the amount remaining in the estate.
Stop and Pray with Us
Lord, help me to remember that my life is in your hands and that you have planned out my future. Because of Jesus’ saving love, I can boldly pray to you for peace in my heart, a generous and patient spirit, and a life which uses my time of grace to be a blessing to others and to praise your name. Amen!