Heir puts couple in bind over estate

Request for advance on inheritance poses difficult questions

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When the childless retired couple created a living trust to leave their estate to relatives and friends, they never dreamed one of the heirs would come looking for his money early.

But when an adult nephew did that, it raised a host of uncomfortable questions.

"Although we would like to help him with some of his financial problems, we were a little taken aback by his request," the Florida couple - who asked not to be named because of the sensitivity involved - wrote in a letter asking for advice on how to respond.

Would the other heirs resent such an advance, or ask for a share, too? And if they deplete substantial assets now, what happens if they need money in the future?

"The good news is that the couple isn't polarized," with one spouse wanting to give the money and the other unwilling, said Olivia Mellan, a Washington, D.C., psychotherapist and author of several books on money and relationships.

Such requests can sometimes be a blessing in disguise because they catch people a little uncertain about the strength of their own portfolio, said Paul Schervish, director of the Center on Wealth and Philanthropy at Boston College.

Take time to conservatively estimate future cash-flow needs and you'll have a better understanding of whether you can consider giving away the surplus before death, Schervish said.

The couple, in their 70s, said they have a detailed understanding of their finances and could comfortably afford to help out the nephew, though it would mean penalties from cashing in long-term investments.

But they couldn't bankroll all the heirs now, and that's where the problems would start, they fear. The nephew isn't in dire straits and doesn't have an addiction problem, but some extra cash could help wipe out his education and other loans and set him up nicely for the future.

"We worry that even if everyone said it was all right, eventually there may be bad feelings about it," the husband said.

What the couple needs most is to devise an exit strategy, said Mellan. They're at heart uncomfortable about giving the money away and seem to place a high priority on equality in their bequests.

"Of course, they could simply tell the nephew they don't have the money to give now because of their own planning needs and leave it at that," Mellan said. "Besides, if they say yes, then they'll have to tell everyone else this is happening, which could be humiliating for the nephew."

A final option could be to lend the nephew some money to help with his immediate needs, knowing that the risk is high that the money won't be returned.

"They could deduct that amount from his inheritance until it's paid back," Mellan said. "That way they could do it as a private loan and everyone doesn't need to know."

Could it create a slippery slope? Absolutely, Mellan said.

"They really need to just start talking about their feelings within the family," she said, and to learn to live with the knowledge that the money will affect every heir differently.

The couple has composed a long letter to their nephew explaining their fear that giving him the money now would cause family strife.

Writing the letter let them vent their shock at being asked and laid out their arguments for why they most likely will decline, the husband said.

But the couple plans to talk to their nephew face to face, editing the ideas in the letter down to their essence: We love you, but no.

Janet Kidd Stewart writes for Tribune Media Services.

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