Are you considering unequal inheritances for your children? Traditionally, people think that if they have multiple children, they need to leave their estate to them equally. In many cases, that's the way the older generations of their family did it. Or perhaps there was no will, and after the state took all of their money and forced your family to go through probate, the law told you to divide what's left equally. No matter where you got that notion from, there is no requirement that you need to divide up your estate equally amongst your kids. In fact, many families choose to use an unequal inheritance because each person's estate plan is unique to them - you don't need to follow what anyone else told you to do.
Why Would You Do an Unequal Inheritance?
First of all, there's no law requiring you to do an equal inheritance. If you try some DIY-form website, it will likely default to it, but this is your estate plan and you can do what you'd like to do.
- Caregivers. One common situation where an unequal inheritance may make sense is if one of your children has been taking care of you while you were sick or has otherwise made more sacrifices than your other kids to help you out.
- Need. Another common situation is if one of your children is in more need than the other. For example, if you have three children and two of them work on Wall Street as executives and your third child is in a much lower-paying job without many retirement benefits, the inheritance may mean much more to that third child than to the executives.
- Special Needs or Disability. If one of your children has special needs or has some type of disability, you'll want to consider a trust to protect their inheritance. Often times, that trust may be expensive and create an unequal inheritance, but your other children will understand the need for it. It will allow them to not be solely responsible for the care of their sibling.
- Spendthrifts. You may have one child who will spend the inheritance before you've even had a funeral. We call them "spendthrifts" in the law and they are a common reason to make sure your estate plan is properly drafted and planned out.
- Equalizing Past Gifts. If you've been giving one (or more) of your children "advances" against their inheritance, you'll want to make sure that the advances have been documented and you can then use an unequal inheritance to equalize things in the end.
- Blended Families. If you or your spouse remarried and has children from a prior relationship, you'll want to make sure your estate plan is properly crafted. You may not want your estate to go to your stepchildren (or maybe you do) and it will make a difference if you die without a will and you did or did not adopt those kids. So if you are in a blended family, make sure that you have an estate plan designed for you.
These aren't a totally exhaustive list of why you may want an unequal inheritance. Each person has different reasons for planning their estate in an unequal manner, but they should give you a good place to start. And to make sure it's done right, you'll want to make sure you speak to a professional, including an attorney and a financial advisor, to make sure it's done according to your wishes.
How to Avoid Hurt Feelings
A large concern for parents is that the children who do not inherit as much will have hurt feelings or resentment. The most common way to avoid this is to talk together as a family before the estate plan is signed. Although you may think it's going to be a hard conversation, you may find that it goes well and that everyone is on the same page. Especially if they know about the unequal inheritance ahead of time, your children will be far more understanding when they need to execute the will.
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If you don't have a will yet, or you have one that you may need to update, let's set up a Legal Strategy Session to review the best options for you and your family.