How To Dispose of Assets Outside the Family
Estate planning isn’t just about distributing your things after you’re dead; it’s about the relationships you’ve established in your life. It’s difficult to face your own mortality, but it’s important to make plans to leave items to people in your will or through a living trust.
If you die without a will, your assets will pass to members of your family. The law is concerned with providing for your spouse and children, but if you don’t have either of those, then your assets will pass to the nearest available relative or, failing that, the government.
If you’d like to pass along some (or all) of your assets to someone who isn’t related to you, you’ll need to make that wish known now. Be aware that your family might fight the transfer of your property to friends, and they might have a legal right to do so unless you make your wishes known explicitly.
One way to ensure that an asset goes to someone other than a family member is to give that asset as a gift while you’re still alive. If that approach doesn’t appeal to you, you can create testamentary documents describing how you want your things to be distributed. Select someone to act as your executor or personal representative who’ll see that your plans are carried out as you wish and who is willing to fight back if family members object to your demands.
Get it down in black-and-white
If you want certain items to go to certain people, your will needs to be very specific in describing your wishes. Many states allow for a list of items – separate from a formal will – containing information about whom you want to inherit your property. In these states, such a list is considered valid if it’s referred to in the will. Lists like this aren’t intended to distribute money or other intangible assets. They’re primarily used as a way to distribute items around your home that might have sentimental value.
Remember that any decision you make can be challenged in court. Dramatic as it may be when a character in a novel slights a relative by leaving him out of the will, in real life, that relative could easily sue. Warn your loved ones in advance to eliminate surprise. If you think that your family won’t have an issue with or already expects certain people outside the family to be named in your will, talk to them about your intentions anyway, just to be safe.
One of the best ways to secure assets for a friend or companion is to set up a trust. You’ll have more control over when the person receives the money than you would if you gifted these funds in a will, and the structure of the trust may clarify any family concerns before they have the opportunity to become contentious.
Note that investment and bank accounts with transfer-on-death designations won’t usually go to beneficiaries outside your immediate family. You can leave IRA and 401(k) assets to someone outside the family but may need a spouse’s permission to take this approach.
A carefully prepared, up-to-date estate plan is essential when leaving assets to friends. There may be people in your life whom you consider family but who may not be recognized legally as relatives. Laws pertaining to estate planning and inheritance rights vary between jurisdictions. Whether you are passing along a few items of sentimental value or substantial assets, be sure to work with qualified professionals so that your wishes will be carried out despite any potential resistance from your family.