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Four Scenarios Where an Unequal Inheritance Might be the Best Choice

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It’s a topic we’ve written about in the past here on the Blog: is it right or wrong to give an unequal inheritance to your heirs in your will? Some would argue that fairness demands an equal division of assets among your beneficiaries, but is that realistic? Are there scenarios in which an unequal inheritance is the best choice?

We realize that this question is typically about much more than money. When a parent spells out his or her bequest to adult children, especially in families where sibling relationships are strained, anything perceived as unequal or unfair has the potential to aggravate old wounds and rivalries. In extreme cases families can end up in costly litigation as aggrieved beneficiaries battle with those who seem to have been favored by a deceased parent.

Earlier this year, we came across this article on this touchy topic from Kiplinger, written by estate planning attorney Tracy Craig.  She provides what she calls “four scenarios in which it’d be appropriate for one or more of your children to inherit differently than their siblings.” Her answers are brief and basic, so let’s take a look and see if she has covered this important topic sufficiently or left questions unanswered.

Unequal Inheritance is a Common Family Dilemma

Craig begins, “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 the following situations that Craig presents as being potentially appropriate times for a discussion of unequal inheritance, along with the pros and cons of treating children differently from their siblings.

Unequal Inheritance: When One Child is Acting as Primary Caregiver

In many family situations, one child steps into the role of primary caregiver for one or both elderly parents. These responsibilities could be extensive, including the coordination of medical care and appointments with doctors and other health care providers, being heavily involved in end-of-life care, paying bills, and companion care. This role is often served by a child who lives with or close to the parent in need.

Craig writes, “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.”

She adds, “Similarly, a parent may wish to give the caregiver child a larger percentage of the inheritance in recognition of the additional help provided.”

Unequal Inheritance: When One Child Has Special Needs

Elderly parents of special needs children should definitely take a close look at their estate plan to make sure that the ongoing care of the child is ensured after the parent’s death. This may result in setting aside a higher monetary amount than the other siblings receive.

Craig writes, “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.”

She notes that this scenario is one in which the other children are often more understanding, since they are likely going to take on some measure of the caretaking of their sibling after their parent passes.

Editor’s note: In a related case involving celebrity Aretha Franklin, one of the singer’s adult sons had special needs and was accommodated differently in the contested estate plan. This settlement received a great deal of news coverage at the time including this story from NPR.

Unequal Inheritance: When Other Behaviors Create Problems

While we’ve written before that it’s not wise to “punish” the behavior of surviving family members with an estate plan, Craig advises that there are some behaviors that may preclude a child from being included in the will, either in an equal share or even at all. Issues like mental illness, substance abuse, divorce, or irresponsibility with money could all be reasons for this.

Craig writes, “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 [described in a related Kiplinger article] is the choice some families make.”

Unequal Inheritance: When One Heir is Better Off than Siblings

It’s sometimes true that a certain child becomes wealthier and more secure than their siblings, and this may result in the child themselves asking for less, or a parent deciding that a child doesn’t “need” an equal share with their more “deserving” siblings.

But while this may seem like an obvious choice, Craig does warn, here: “Wealth can change over a lifetime, so this should be well thought out.”

Difficult Choices Demand Open, Honest Conversation

While Craig recognizes that these are all “sensible reasons” to give your children unequal inheritance, that doesn’t make the choice any less difficult. “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,” she writes.

In the end, no amount of money can replace good communication. Craig concludes, “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.”

As Rajiv often recommends, many families have benefitted from a family conference held on “neutral ground” as the attorneys of Life Point Law have done hundreds of times. With an attorney acting as facilitator, these family conferences can clear the air and provide an opportunity for open discussion of even the most challenging topics. If this is of interest to you and your family, we urge you to get hold of us soon.

Rajiv’s Take: Don’t Let Unequal Inheritance Be a Surprise

We asked Rajiv Nagaich for his views on this topic. It’s something he’s seen many times in his years of legal practice. There are ways, he says, to minimize family trauma.

“It’s guaranteed that an unequal inheritance is going to cause some trauma if it comes as a surprise,” Rajiv observes.  “Instead, why not have a private discussion with each child alone, especially the one who is getting less? You can explain that you’re thinking about taking this action, but know that it might come off as not being fair. Ask for that child’s input. If a child says it is not fair and does not like it, you now know how it will play out.”

Rajiv suggests that knowing all this ahead of time might cause you to change your mind about dividing your estate unequally in your will. “You may choose to make the split differently, while you are living,” he says, “perhaps by leaving funds to a special trust for the one who needs more help.” There may be other options that your estate planning attorney can recommend. 

“The bottom line,” Rajiv emphasizes, “is to make sure there are no surprises after you’ve passed away. You won’t be there to manage the mess this might create. My experience is that when this issue is approached properly, most children will be more than happy to support your decision if they understand your reasons.” 

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(originally reported at www.kiplinger.com) 

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