The idea of dividing up your estate between your children can be daunting. Does it make sense to split everything equally? Or should you consider a different arrangement? Also, how might your choices today affect your children in the future? In Brian M. Douglas & Associates’ latest blog, we’re looking at the situations where equal division is a good idea, and when equitable division might be the right option for your family.
Dividing your inheritance equally among your children means that everyone will receive the same amount. If you have two children, they will each get 50%. If you have five children, they will each receive 20% of your estate.
An equal inheritance is a good idea for your family if all of your children are similarly situated in life. They all have similar salaries or incomes. They are all emotionally capable and responsible people. All of the children have received the same financial support from their parents, whether that was college tuition, their first car, or maybe paying for their weddings or putting money towards a house. If your children do not need immediate financial assistance and they’re all responsible with money, then it makes sense to divide your estate equally among them.
If your estate assets include both money and tangible assets (ex: home, vehicle, art, jewelry), in order to divide these evenly, you will first have to determine the dollar value of each tangible item. Then, you’ll need to decide which child should inherit each item, and compensate your other children for the difference in dollar amounts. For example, if you decide to leave your oldest child your home, you might consider giving your other children a higher percentage of your financial assets to make up the difference.
Different Inheritance Amounts
Whereas equal or even inheritance might work for some families, for others, it just doesn’t feel appropriate. There are a number of reasons why a parent would want to leave their children different amounts. One of the most common reasons is that one child has been the “family caregiver,” and the parent or parents want to reward or compensate that child for their time and effort. Or, the parents might leave the most expensive asset to their child caregiver, such as their primary residence.
Another common reason for unequal inheritance is the family’s history of giving. A parent may have given considerably more money to one child to cover the cost of their tuition, a wedding, or a down payment on a house. As a result, the parent might want to leave more money to the other children to account for the difference. For example, let’s say the parent gave the oldest child $50,000 for tuition, but only $25,000 the other two children for their college costs. The parent might want to leave the younger children an extra $25,000 each to account for the difference in the financial gifts.
Other common reasons for unequal inheritances include children who need special care or help with ongoing medical needs, children from blended families (ex: step-children vs. biological children), or children who are not financially responsible. Parents who own a family business might also leave their children disparate amounts, depending on which children are interested in continuing the operation.
Preventing Future Will Contests
If you decide not to divide your estate evenly between your children, your decisions could lead to a lawsuit in the future. One of your children might file suit and contest your Last Will and Testament. Lawsuits can be emotionally and financially draining, not to mention a situation you don’t want your children to have to deal with. There are a few ways to mitigate the risks of a will challenge and to ensure your final wishes will be honored:
- Ask your doctor to be a witness at your will signing, which can help invalidate future challenges based on capacity
- Do not involve your children directly in the drafting of your will, so as to avoid claims of undue influence
- Consider including a No Contest clause in your will; if a beneficiary tries to challenge the will, they will be disinherited and lose their right to your estate assets
- Use a trust to provide guidance and structure for any children who might not be financially responsible
Above all, one of the best ways to avoid future lawsuits and will contests is to talk to your children. Discuss your estate plan. Be sure to tell your children who is inheriting (or not inheriting) what, and your reasoning for that. Communication can help avoid surprises, confusion, and hurt feelings. The goal is an easy transition and maintaining family harmony.
Have Additional Questions? Contact the Estate Planning Team at Brian M. Douglas & Associates
Thinking about your estate and how you would like to provide for your loved ones – these can be tricky decisions. At Brian M. Douglas & Associates, we can walk you through your different options and help you craft an estate plan that is best for you and your family. If you have additional questions about inheritance or would like to schedule an estate planning consultation, please reach out to us at (770) 933-9009. We would be happy to help.