An 'Equal' Inheritance for All the Kids Doesn't Always Work

Multigenerational family members walk on the beach, some of them holding hands. — (Image credit: Getty Images)

Every estate planner has conversations with their clients about how children should inherit. While most people assume that children should inherit equally, many clients contemplate treating children differently for various reasons.

Here are some situations where an equal inheritance might not be appropriate, and the pros and cons of treating children differently.

Scenario #1: A caretaker child/child lives with the parent.

Many times, one child primarily helps an elderly parent. This could include helping with medical appointments, coordinating care with various health care providers, being heavily involved in end-of-life care, paying bills and companion care. Oftentimes, this care is provided by a child who lives with or is close to the parent.

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If a child lives with the parent, it may be appropriate to leave the home to that child to the exclusion of the others. This could either be done by simply giving the home to the child or leaving the home to a trust for the child for their lifetime.

Similarly, a parent may wish to give the caregiver child a larger percentage of the inheritance in recognition of the additional help provided.

Scenario #2: A child has special needs.

If a parent has been the primary caregiver for a special needs child, then the estate plan should take this into account to ensure that the child will be properly taken care of after the parent’s death. Depending upon available government aid, this can often mean a special needs trust or supplemental needs trust for the child, with more or less than an equal share of the estate being held by the trust.

In this scenario, the other children can often be more understanding. In practice, many times the siblings are involved in the plan for caring for their grown sibling when the parents are no longer able.

Scenario #3: A child has mental health or other issues.

If a child has issues, such as mental illness, substance abuse, divorce or creditors, or if the child is bad with money, it may not be appropriate to leave an outright inheritance, or any inheritance, to that child. The same is true for an estranged child. The use of trusts to provide some (protective) support for such a child may be appropriate. Occasionally, disinheriting a child is the choice some families make.

Scenario #4: A child has more money than their siblings.

Sometimes a wealthy child may tell a parent to treat them differently and give more to other siblings, or a parent may feel that a very wealthy child does not “need” the inheritance. Wealth can change over a lifetime, so this should be well thought out.

What is right for you?

While these can all be sensible reasons to treat children differently, these are often difficult choices for parents to make. Many parents feel that they are morally obligated to treat their children equally; otherwise, after death, the children will harbor resentment and/or sibling rivalries will resurface, irreparably damaging those relationships.

It is important to be completely open and honest with your estate planning attorney. Everyone has family issues. While these conversations can be difficult, it’s best to give your estate planner all of the family information so these choices can be considered carefully.

Tracy A. Craig is a partner and chair of Seder & Chandler's Trusts and Estates Group. She focuses her practice on estate planning, estate administration, prenuptial agreements, guardianships and conservatorships, elder law and charitable giving. She works with individuals in all areas of estate and gift tax planning, from testamentary estate planning and business succession planning to sophisticated lifetime leveraged gifting techniques, such as grantor retained annuity trusts (GRATs), intentionally defective grantor trusts, family limited liability companies and qualified personal residence trusts (QPRTs). Tracy serves in various fiduciary capacities, including trustee and personal representative (formerly known as executor). She also works with clients on issues facing elders.

Emily Parker Beekman is a Wealth Planning Strategist at Corient in Boston. She works with clients and their advisors to develop and implement their estate planning, wealth transfer and charitable planning strategies. Prior to entering the wealth management field, Emily spent 10 years as a practicing trusts and estates attorney, where she assisted clients and generations of families regarding estate planning, estate and gift taxes, probate law, probate avoidance, estate and trust administration, philanthropy and specialized in estate planning for disabled persons, guardianship and conservatorship matters and long-term-care planning and other elder law matters.

Disclaimer

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

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Tracy A. Craig is a partner and chair of Seder & Chandler's Trusts and Estates Group. She focuses her practice on estate planning, estate administration, prenuptial agreements, guardianships and conservatorships, elder law and charitable giving. She works with individuals in all areas of estate and gift tax planning, from testamentary estate planning and business succession planning to sophisticated lifetime leveraged gifting techniques, such as grantor retained annuity trusts (GRATs), intentionally defective grantor trusts, family limited liability companies and qualified personal residence trusts (QPRTs). Tracy serves in various fiduciary capacities, including trustee and personal representative (formerly known as executor). She also works with clients on issues facing elders.