Will

A will is probably the most important document that you’ll ever sign.  Among other things, it determines who gets your possessions when you die, things like your cars, house and personal property.  If you don’t have one, the probate court will decide who gets your things, and also who will take care of your children.  There may be someone in your family who you would prefer to take care of your children, and there may be someone else who you really DON’T want to have your kids.  These are decisions not to be left to a judge.  A will does NOT determine who gets your IRA’s, annuities, or life insurance death benefits.  Those types of accounts have beneficiaries named on them, and are NOT directed by a will.  In fact, you need to make sure your beneficiary designations are correct.  Even if your will is more current than your beneficiary designations, the beneficiaries named on IRAs and life insurance is who will get that money.

Living Will

A living will is a document in which you state your wishes regarding medical treatment, especially treatment that sustains or prolongs life by extraordinary means (life support).  This document is used when the signer becomes mentally incompetent or unable to communicate (such as a coma).  If you don’t have this document, the doctors are going to keep you alive as long as possible.  It will then turn into a court battle if your family feels that it is better to take you off of life support.  If you are married, your spouse may feel differently than your parents do about it, so then you have a family feud/court battle going (remember the Terri Shaivo case?).  Having this document written up in advance will save everyone a lot of guessing and heartache.

Power of Attorney (POA)

This is a document that is also very important to have.  It gives someone else permission to make financial and legal transactions in your behalf.  So obviously, your POA needs to be someone that you trust very much.  It can either be a Durable POA, which means that person can sign things for you at any time, or a Springing POA, which means that it only comes into effect if you become incapacitated.

These are a few of the most important legal documents that are important for everyone to have.  For these simple documents you can use a website like www.legalzoom.com or even an off-the-shelf software like Quicken Willmaker Plus 2010  for under $50.  However you get them done, the most important thing is just GETTING THEM DONE!

While going to get a burger and shake may not seem like a big deal, the stakes get much higher as children grow older and parents start making financial gifts, or giving financial assistance to them.

In personal financial planning, reducing a person’s estate is often a concern.  Many people who are in a position to do so, will make financial gifts to their children for estate planning purposes.  This is usually done when someone is trying to reduce their taxable estate, or just to let their kids enjoy some of their inheritance early.  Additionally, parents will often give financial assistance to children when there is a need.  While there is nothing wrong with giving money to your children, you need to be very careful in how you do this so that nobody screams, “That’s not fair!”

Equal gifts, but not equal needs

Every family that has adult children knows what it’s like to have at least one child who has a greater financial need than the others.  Parents are often naturally inclined to want to help this child out a little more than the others.  This is where it can get a little sticky.  If a parent gives money to one child and not to the others, they take a chance of driving a wedge into the family.  While you may think you are doing that child a favor, (and you are) your other children may not feel the same way about it when they find out.  I have seen several situations like this where siblings who were better off financially felt left out, cheated, and maybe even less loved, because their parents didn’t give gifts equally.  I’ve seen this drive a wedge between siblings, and between parents and children.

Leaving more to one child

I’ve also seen situations where parents left more of their estate to one child when they passed away.  Again, this was a case where the parent felt that this particular child had a greater financial need and would benefit more from the larger inheritance.  While this may have been true, the child who inherited less was left to feel left out and somehow less loved.  Even though this is done with good intentions, it can really tear a family apart.  The more well-off child resented the sibling that was left with a bigger inheritance, and at this point the two have not spoken to each other in about 10 years.

Is there a better way?

Only you can decide the best way to handle these situations.  But I have seen some different things that people have done to try and make .  In one situation, a child was having some financial difficulties and the parent wanted to help them out.  They made an agreement that any money the parent gave them now would be deducted from their final inheritance when the parent passed away.  I thought that this was a fair way to help the child out now, but still be fair to the other children in the family.  I have seen other families require the child to pay back the money over time, but with little or no interest.  This method helps the child out now and allows them pay the money back when they get back on their feet.

There are a lot of ways to deal with these situations that allow you to help out a child in need.  While it’s easy to think, “My other kids don’t need this money”, you may not be doing them a favor in the long run.  You may in fact be setting them up for family contention down the road if you don’t give equally to all of your children.  Even if they don’t need the money as badly, if another child gets more, there could easily be feelings of resentment and bitterness towards the other child, and towards you.  No one wants to be remembered that way.