“The Parable of the Prodigal Son is a biblical story that is referenced often in the context of family estate planning.”
The Prodigal Son is the story is about a compassionate father and his two sons—one who is prodigal and one who is faithful.
The Kansas City Star recently published “A plan for preventing children from squandering an inheritance.” The article explained that the prodigal son demanded his inheritance, then wasted it and returned home in disgrace. However, his father celebrated his return. The faithful son was upset about the celebration because his dad hadn’t done anything like that for him, but the father reminded the faithful son that he would inherit the father’s entire wealth because of his faithfulness.
This brings us to two critical questions that many families must address when developing an estate plan: Will my kids squander their inheritance, and should they each get an equal share of my estate regardless of their relationship to the parents? For children, an inheritance can be like free money that wasn’t earned. In that case, they might easily blow it without thinking about their future needs. A good solution is to establish a trust either while living or at death (testamentary trust through a will) that places restrictions on and controls the timing and amounts of the estate that children can receive after death.
A common schedule is outright distributions of one-third of the estate at age 25, one-half of the estate at age 30, and the rest at 35. Hopefully, by that point, the child will be financially mature and not have creditor issues. This also better assures that the family money stays in the bloodline and out of any unintended recipients, like in-laws.
The Prodigal Son parable also discusses the rights of beneficiaries. According to Jewish laws of inheritance, found in Deuteronomy 21:17, the firstborn son receives two-thirds of the inheritance, and younger son receives the remaining third. The 66-33 split came with the requirement that the oldest son take care of the aged parents.
However, today if you die without a will, the intestate laws of the state will apply. For example, in Kansas and Missouri, the rules say that children receive equal shares. However, if you die with a valid will or a trust, the intestate rules don’t apply. The will or trust states how the shares to children are allocated.
Without an estate plan with properly drafted documents, some family issues may not be addressed appropriately and may result in unintended outcomes. An estate planning attorney will help to you clarify your wishes and then create the legal documents to achieve your goals.
Reference: The Kansas City Star (November 30, 2016) “A plan for preventing children from squandering an inheritance”