I ran across this article online, and it reminded me of a situation I occasionally encounter while working with clients with children. Some clients treat their children equally when it comes to asset distribution. Others, however, aren’t so sure, and sometimes we talk about when and why equal distribution may not be the right course of action. The following article, “How Should Your Children Inherit? 4 Scenarios Where ‘Equal’ Is Not Appropriate,” was published by Kiplinger on 12/19/22. It was written by Tracy Craig, Fellow, ACTEC, with contributions from Emily Parker Beekman. It does an excellent job of providing examples of when someone might not want their assets divided evenly among their children.
“Equally sharing the wealth among the kids isn’t always fair, such as when one sibling is the primary caretaker, or another is already wealthy.
Every estate planner has conversations with their clients about how children should inherit. While most people assume that children should inherit equally, many clients contemplate treating children differently for various reasons. Here are some situations where an equal inheritance might not be appropriate, and the pros and cons of treating children differently.
Scenario #1: A Caretaker Child/Child Lives With the Parent
Many times, one child primarily helps an elderly parent. This could include helping with medical appointments, coordinating care with various health care providers, being heavily involved in end-of-life care, paying bills and companion care. Oftentimes, this care is provided by a child who lives with or is close to the parent.
If a child lives with the parent, it may be appropriate to leave the home to that child to the exclusion of the others. This could either be done by simply giving the home to the child or leaving the home to a trust for the child for their lifetime.
Similarly, a parent may wish to give the caregiver child a larger percentage of the inheritance in recognition of the additional help provided.
Scenario #2: A Special Needs Child
If a parent has been the primary caregiver for a special needs child, then the estate plan should take this into account to ensure that the child will be properly taken care of after the parent’s death. Depending upon available government aid, this can often mean a special needs trust or supplemental needs trust for the child, with more or less than an equal share of the estate being held by the trust.
In this scenario, the other children can often be more understanding. In practice, many times the siblings are involved in the plan for caring for their grown sibling when the parents are no longer able.
Scenario #3: A Child With Issues
If a child has issues, such as mental illness, substance abuse, divorce or creditors, or if the child is bad with money, it may not be appropriate to leave an outright inheritance, or any inheritance, to that child. The same is true for an estranged child. The use of trusts to provide some (protective) support for such a child may be appropriate. Occasionally, disinheriting a child is the choice some families make.
Scenario #4: Children with Wealth Disparities
Sometimes a wealthy child may tell a parent to treat them differently and give more to other siblings, or a parent may feel that a very wealthy child does not “need” the inheritance. Wealth can change over a lifetime, so this should be well thought out.
What Is Right for You?
While these can all be sensible reasons to treat children differently, these are often difficult choices for parents to make. Many parents feel that they are morally obligated to treat their children equally; otherwise, after death, the children will harbor resentment and/or sibling rivalries will resurface, irreparably damaging those relationships.
It is important to be completely open and honest with your estate planning attorney. Everyone has family issues. While these conversations can be difficult, it’s best to give your estate planner all of the family information so these choices can be considered carefully.”
The writers did a good job explaining why, in some cases, disproportionate inheritance makes the best sense. The best advice is that if you have concerns or doubts discussing your plans with your children and your estate planning attorney is critical. No one wants their children to resent one another due to bad feelings about their inheritance. My job as an estate planning attorney is to help you make the best decisions for your unique situation. I welcome the opportunity to help update or create your estate plan with you, and I look forward to answering your questions. Feel free to call me at 513-399-7526 or visit my website www.davidlefton.com.