Fair vs. Equal?

What if Treating Your Children Fairly Means Unequal Inheritances?

When planning their estate, most parents try to treat their children equally in an effort to be fair.  However, sometimes being fair or doing what’s right by your children may not mean equal or the same inheritances.

The Key Takeaways

  • Treating children the same does not always provide for equal inheritances.
  • To be sure each child receives an inheritance, you may need to be customize your estate plan to treat all of your children as individuals.
  • Not providing an outright inheritance is usually a good choice, as assets that stay in a trust are protected from irresponsible spending, divorce, predators, and creditors.

When Unequal Inheritances May Be Fair
There are often special situations to consider before you distribute the family pie into equal parts. For example:

  • It may be important to leave more assets to your son who struggles to support his family on a modest teacher’s salary than to your daughter who makes significantly more money, married a Wall Street tycoon, and has chosen not to have children.
  • You may want to give a larger inheritance to a child who has dedicated himself to volunteer work, the arts, religion, or public service.
  • You may want to reward a child who has sacrificed part of his own life to care for you.
  • You may want to provide for grandchildren even if one child has more children than another.
  • You may have a much younger child who needs care into adulthood whereas your adult children are financially secure.
  • You may have a child who has contributed to the family business and other children who did not.  Instead of making them all equal owners in the business, you may want to leave the business to the one who has contributed and shown an interest, and then provide for the others with other assets and/or life insurance.
  • You may have a special needs child who will need care for his entire lifetime.

Distribution of Inheritances May Also Vary
Not only do you need to decide how much your children should receive, but also whenthey will receive it—and that could vary for each child. You can distribute inheritances in one lump sum or in installments; or, you can keep an inheritance in a trust. Consider elements such as the size of the potential inheritance, your children’s ages and family situation, how they have handled their own money, and how much they need your financial gift.

What You Should Know
Many parents do not provide outright inheritances, preferring to keep the assets in a trust for their children. The trustee can make dispersals for your children’s benefit based on guidelines you provide, but assets that stay in the trust are shielded from reckless spending, creditors (divorce, bankruptcy and lawsuits), and predators (those with undue influence on your child).

Frank and Jen have two sons who are stable and responsible with their own money; they will receive their inheritances in a lump sum after their parents both have died. But their daughter is in and out of rehab and has been irresponsible with her own money. Fearing she will misuse her inheritance, they decided to keep her share in a trust so it can provide for her without being completely available to her. 

Actions to Consider

  • If you can afford it, consider giving your children some of their inheritance now. Not only will you have the opportunity to witness them appreciating your gift, but it will provide understanding as to how your children will handle an inheritance.
  • Consider whether your children should inherit everything you own.  Perhaps you have additional goals such as providing for your grandchildren’s education, gifting other loved ones, providing for beloved pets, making charitable contributions, or setting up a family foundation or donor-advised fund.

It’s important that you take action to guarantee your children receive their inheritances as is best for them as individuals.  Our office can ensure your estate plan and your children’s best interests match… and continue to match as life unfolds.

If you do not have an estate plan or need to update your current plan, I offer a free initial consultation for estate planning. As an estate planning specialist serving Sioux Falls and southeast South Dakota, it would be my pleasure to sit down with you and determine how to accomplish your estate planning goals. I get really excited about helping parents pass on their values, maintain their privacy, and protect their children from creditors, divorce, and bankruptcy.  It is actually fun to teach folks about the amazing planning opportunities that are really available to everyone.

Call or email today to set up a no obligation appointment to meet with me to review your estate planning needs.

Doug Thesenvitz
605-334-9448
doug@siouxfallsestateplanning.com
300 N. Dakota Suite, 603
Sioux Falls, South Dakota

2017-08-29T15:19:45+00:00 July 11th, 2014|Tags: |