As parents near retirement, they grapple with preparing a legacy, which includes deciding how to allocate assets among their kids. This decision-making may prompt tricky questions about whether to treat children equally and how to handle an unequal inheritance.
While equality sounds like the epitome of fairness, real-life circumstances often challenge this idea. Here is an overview of when an equal inheritance makes sense and situations that may require a different approach.
The Case for Equality
Here are three reasons you may opt to divide your assets equally:
1. Avoid Family Conflict: Treating your children equally can prevent disputes or feelings of resentment after your passing. Money can be contentious, and perceived favoritism can lead to rifts between siblings.
2. Simplicity: It’s straightforward. If you divide assets equally, there’s little room for misinterpretation.
3. Fairness as a Principle: For many, establishing an equal inheritance is a way to live out their values. It sends a message that you love and respect your children equally, regardless of their life choices or circumstances.
When Might Unequal Shares be Justified?
Some circumstances may necessitate an unequal inheritance. This includes:
1. Financial Disparities: One child may be financially stable, while another has faced hardship or has additional needs (like a child with a disability). Some parents choose to provide more to the child who would benefit most from additional financial support.
2. Prior Financial Assistance: You may have already provided significant financial aid to one child during your lifetime, such as paying for an expensive education, helping with a home purchase, or supporting them through a crisis. Some parents adjust their wills to account for these disparities.
3. Caregiving Roles: If one child has taken on a primary caregiving role, especially if it led to career sacrifices, some parents might see fit to compensate them for their time and effort.
4. Relationships: It’s a hard topic, but not all parents have the same relationship with each of their children. Some parents may leave more to those they are closer with or who are more involved in their lives.
5. Encouraging Responsibility: There are instances where parents might be concerned about a child’s ability to manage a large inheritance due to personal struggles or financial irresponsibility. In such scenarios, they can set up structured inheritances or trusts.
Important Considerations for How to Handle an Unequal Inheritance
Communication is Key: If you’re considering an unequal inheritance, it might be wise to discuss your reasons with your kids. Clear communication can prevent misunderstandings and reduce potential conflict after you’re gone.
Work with a Professional: Estate planning can be complex. Consider working with a financial advisor and an attorney who can provide guidance and ensure your wishes are legally documented.
Periodic Reevaluation: Life circumstances change. Regularly review your will and consider whether the allocations still align with your desires and your children’s needs.
It’s Up to You
Deciding whether to treat your children equally in your will is a deeply personal decision. What’s most important is ensuring that your distribution of assets aligns with your values, intentions, and family’s unique needs.
If you’re worried about how to handle an unequal inheritance, plan well and ask for help.
Remember, equality is not always synonymous with fairness, and the “right” decision is the one that feels most aligned with your wishes for your family’s future.
To learn how to handle an unequal inheritance, reach out to an advisor using the form below.
Source: “Should You Treat Your Kids Equally in Your Will?” FMeX. 2023. 13198.pdf (fmexcontent.s3.amazonaws.com)