When considering how best to divide your assets, you may believe a policy of “share and share alike” is the best solution. This strategy is perhaps the easiest method of financially supporting your children and often the way to avoid conflicts and complaints. But does equality necessarily equate to fairness?
A more practical approach to dividing assets may be one in which you recognize and compensate for differences in the abilities and needs of your children, even at the risk of producing some conflict.
Through your estate plan, you have a chance to provide a measure of fairness that your children may not have found in their own lives. The process is a delicate one. However, bringing about family fairness through an estate plan may be the last chance you have to give your children an equal footing in life or to help them compensate for misfortune or adversity.
How you divide your assets is, as always, up to you. But as you consider financially supporting your older children, review the following four scenarios, which may prompt you to spread your wealth unevenly.
Reasons to Consider an Uneven Spread of Wealth
1. Disparity in Age
Assume you have two children, ages 22 and 14. Should you split your estate in half, even though the 22-year-old completed years of private school education and college and the 14-year-old just started public high school?
2. Income and Net Worth
Assume your daughter becomes a partner in an investment banking firm and quickly builds up $100,000 in assets. At the same time, your son becomes a high school English teacher who earns $30,000 per year. Should you leave your estate in equal parts to your son and daughter or acknowledge the difference in their incomes and net worths?
3. Previous Giving
Assume you gave your 24-year-old daughter $40,000 worth of stock in your business as an inducement for her to work with you. You have not, however, given your 18-year-old son a similar gift. Should you divide the assets in your estate on an equal basis?
4. Investment Results of Children
Assume you gave one child stock in Company X, which has risen in value. You gave another child stock in Company Z, which has gone bankrupt. How should you then allocate the balance of your assets?
In each of the preceding examples, an equal division of property has the potential to create or perpetuate unequal results. This is not to say you cannot choose an unequal result. Rather, it highlights the need for financial and estate planning that leads to reasoned decisions about how you leave property, instead of blanket decisions to “spread the wealth equally” without intention.
There is no “right answer” to each of the questions posed. You decide what makes sense for you and your family. An advisor makes a great unbiased sounding board as you determine how to reconcile differences, if at all.
The Key to Financially Supporting Older Children: Listen First
As you process your decision, one of the first steps is to talk with your children. You might do this on a one-to-one basis or through a family conference. Help them verbalize their hopes, dreams, and expectations as well as their worries, concerns, and frustrations.
By listening first, you can gain valuable insights into how to divide your estate constructively without causing hurt feelings and resentment. The decisions may be difficult to make and carry out, but your family will appreciate your efforts.
For an expert perspective on how to financially support your older children, reach out to a member of our team using the form below.
Adapted from: “Dividing the Family Pie.” FMeX. 2015. https://abm.emaplan.com/ABM/MediaServe/MediaLink?token=84ecd3e247ed4f1ca0b5ef3338d88c6f