Parents who have multiple children are often surprised at how differently they all turn out. Each may achieve success in his or her own way, but the paths they choose and how they define success can vary greatly.
If you are working to draft an estate plan and intend to leave significant assets to your children, their differences can create some difficult problems. The first question you’ll need to ask yourself is: “Do I need to leave assets to all of my children equally?” And if the answer is no, you’ll need to ask: “What is the fairest way to determine distribution of assets?”
Perhaps one of your children chooses to work in finance and earns a lucrative salary. Another of your children may go into the non-profit sector and earn only a modest income (despite the important work that they do). Is it fair to leave equal assets to both? Or should you leave more to a son or daughter who needs more financial help?
These are not easy questions to answer, and decisions should be made based on your understanding of family dynamics. Most parents want to avoid sibling rivalry, jealousy and resentment whenever possible.
Before you make your decisions, it helps to know what options are available. Trusts are one way to exercise more control over when and how assets are distributed. They can also be a way to avoid sibling rivalries and tax liabilities at the same time. If passing money directly to your grandchildren through a trust, you may be able to take advantage of a tax exemption known as a generation-skipping transfer.
If estate planning is done well, you may be able to ensure that your family correctly benefits from the assets you leave behind while avoiding the squabbles that can arise when bequests do not seem “fair.” Seeking the help of an experienced estate planning attorney will likely make it easier to strike this sometimes-difficult balance.
Source: Wealth Management, “That’s Not Fair!” Gail E. Cohen, March 31, 2015