I have talked to a lot of clients recently who are pondering whether they should treat their children equally. They love them all; but all of the children are different.
Some things parents consider are:
- Whether one child has already benefitted more from mom or dad than another?
- Whether one or more of the children have taken better care of the parent?
- How financially stable each child is?
- How financially needy each child is?
- Should particular assets go to specific children?
When approached with the question of should I treat my children equally, I like to provide the legal answer and a practical answer. Legally, no one is entitled to inheritance and you can distribute your estate to whoever you want, in the amount you want. In practicality, when a parent dies and the trust is distributed, distributing to one greater than another can cause conflict between your children. Remember that while you have thought long and hard about these decisions, your children may not see it this way and this may cause a wrench in your children’s relationship if they don’t understand your decisions.
AARP published an article in 2013 entitled How to Leave an Inheritance to Your Kids,
5 simple steps can prevent a lot of bickering or hurt feelings. The advice in this article is pretty spot on. The steps include:
- Manage Expectations with Open Communication – You do not need explain to your children how much they will receive; however it may be beneficial to the trustee, particularly if one of your children is serving, if all children have a reasonable expectation in regards to wealth and management of finances for everyday living and medical needs.
- Level the Playing Field – Do you have to treat your children the same? No. But, it will certainly help minimize arguments at your death if you choose to give a specific item like a home to one child you offset that gift with a like amount of cash to the other child.
- Do the Distributing Yourself – Do not distribute to one child and expect that they will distribute to your other children.
- If you Distribute Unequally, Explain Yourself – If your reason or intent is not clear in the estate plan, please write your children a letter. Remember, you will not be here to answer questions.
- Use a Trust to Eliminate Uncertainty – How you distribute to your children may depend on each child’s needs. We suggest staggered distributions of assets such that children will receive more money as they mature. You can also leave a child’s share in trust indefinitely or even incentivize them to achieve specific goals in order to receive inheritance.
For more information, please see http://www.aarp.org/money/budgeting-saving/info-04-2013/leave-an-inheritance-to-your-kids.html.