Fair Isn’t Always Equal and Vice Versa

When deciding how to split your assets among your children at death, there are many different factors to consider. Equality is certainly one of those factors. But it’s not the only factor. Fair doesn’t always mean equal and vice versa.

Here are some situations in which some parents might think an equal division isn’t necessarily the fairest result:

• One of the children has greater need due to no fault of their own.
• One of the children has won the lottery and has much, much more money than the others.
• One of the children has devoted much more of their time and energy to care of the parents.
• One of the children has been involved in the family farm or other business.

Let’s look at the Webster family: The parents, Sally and Jim, have four kids, Betty, Charlie, Diane, and Eric. The kids are all grown.

Knowing nothing more, you might think they should divide the assets equally between their children.

Let’s see if your thoughts change if we modify the situation in the Webster family.

• Betty has disabilities which will cause her a lifetime of large, unreimbursed medical expenses.
• Charlie won $50 million in the lottery and has more money than he needs to live a comfortable life.
• Diane has devoted countless hours to taking care of Sally and Jim, who’ve lived with her for the past decade.
• Sally and Jim had a business which Eric stepped in to run when their health declined.

In one of these situations, some parents might choose to alter what otherwise might have been an equal division of the assets among their children. Other parents might not.

If you choose to leave an unequal division of your assets, here are some things you might consider to reduce the odds that your children might take issue with your division and challenge your plan or cause disharmony in the family:

• Make sure your wishes are laid out clearly in your estate planning documents.
• If you aren’t leaving one of your children anything, for example, because they’ve won the lottery, be clear that you are intentionally omitting them. If you wish to explain your reasons, do so in person or in a personal letter to them rather than in the estate planning documents.
• Don’t give reasons in your estate planning documents. Those reasons could be used to undermine your plan by arguments that they aren’t applicable.
• Consider leaving a smaller, but significant, inheritance to the child, along with utilizing a “no contest” clause which removes that inheritance if they challenge your plan.

The best way to eliminate conflict and bad feelings from an unequal division is to let the beneficiaries know ahead of time. If you explain your reasons to them, they may not agree with you, but the odds of conflict and bad feelings drop sharply.

Fair isn’t always equal. But an unequal division has the potential to spark bad feelings. Be sure to head that off at the pass by communicating your reasons ahead of time. That’s the best way of achieving your goals, including the goal of family harmony.

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Stephen C. Hartnett, J.D., LL.M.
Director of Education
American Academy of Estate Planning Attorneys, Inc.
9444 Balboa Avenue, Suite 300
San Diego, California 92123
Phone: (858) 453-2128
Read the original article at aaepa.com