Fair and Equal Aren’t Necessarily the Same Thing

Though the season of giving is just in the rearview, the idea of gifts and “who gets what” is constantly top-of-mind for all of our clients. When setting up a will or trust, we are often asked to counsel on how assets should be divided among beneficiaries. What is fair? Should everyone be treated the same? How can we justify treating one differently from others who are similarly-situated (i.e. one of several children). Clients will weigh different factors and think about the needs of their family members… but what is the right thing to do?

If you have more than one child, or you plan to provide for other groups of individuals in your estate plan, you should be asking yourself these questions when you establish your plan, and revisiting them regularly as time goes on. The bottom-line question: should you give everyone in a particular group (i.e. your children) the same amount in your will or trust?

Treating all your children (or some other member of a group of beneficiaries) equally can feel like the best approach at first blush. How can anyone be upset if they get the same as their siblings? However, there are some circumstances that suggest the “equal” approach may not be the wisest strategy, or even the fairest.

Some things you may want to consider…

  • Does one of your children earn considerably more than the others?
  • Does one child have more children of his/her own to provide for than your other children?
  • Does a child’s spouse have resources (e.g. wealthy parents) that will benefit that child?
  • Does one of your children serve as a caretaker, do chores, or help you in other ways compared to your other children? If so, what is that child’s opportunity cost in doing so?

For some of our clients, there is a darker side of that coin…

  • Has one of your children disappointed you so often or so greatly that it impacts how you approach your plan?
  • Does your child have a pattern of behaving irresponsibly? 
  • Does your child have substance abuse issues or mental illness such that an inheritance could harm them rather than help them?

We understand that these are tough questions, made even more challenging by the fact that unequal inheritances may lead to hard feelings and even fights over your will or trust. And while trusts can assist in adequately protecting spendthrift beneficiaries or those with substance abuse or other issues from themselves, you still may conclude that equal just isn’t fair

If you believe the best approach for your estate plan is to treat your children differently with regard to their respective inheritances, here are some ways to avoid potential problems:

Take the time to talk to your children about your will/trust and its contents. If there are going to be difficult conversations, you can choose whether to be a part of them while you’re alive, or just know they’ll happen when you’re gone and have no say in the outcome. Explaining your thought process to your children will help them understand why you made the decisions you did. These tough talks can go a long way toward lessening any shock and reducing the likelihood of fights that could occur if your children first learn about the contents of your will or trust after you’re gone.

Consider compensating your children today. Maybe you have a child who is “there for you” when you need help around the house or assists in running errands while you are still alive. Perhaps your child is serving as a power of attorney or trustee and assists with the finances. You can allow this child to earn a fee for their services. Most plan documents allow for a reasonable fee. In the alternative, you can set a fee separately (by written agreement), or specify the compensation in the documents themselves. 

Consider gifting today. Similarly, if your child is going through a difficult financial time while you’re alive (i.e. divorce, lost a job, childcare or medical bills), you can consider offering financial assistance now instead of later. This help does not have to be an “advance” on an inheritance. And unless you (or the recipient) discloses the gift, your other children/beneficiaries need not be in-the-know.

Safeguard your estate plan against challenges. They say there’s no such thing as fire-proof — only fire resistant. The same is true of your estate plan. Nothing can guarantee there won’t be a fight. But you can take steps in creating your documents to discourage and defend against a challenge. For example, you could mandate that any disputes after you pass away must be mediated rather than litigated. Or, you can include a no-contest clause in your will or trust that mandates that a beneficiary forfeits his or her inheritance if he or she challenges the document. 

You should also work with a qualified estate planner who can help you build a record of your circumstances and mindset, in anticipation of a possible challenge. You could also consider having a psychological or competency evaluation done before and after you execute your documents to demonstrate your were of sound mind at the time. This step, while extreme, could be very important if you believe one of your children will try to argue you were incompetent or subject to undue influence exerted by another when signing your plan documents. 

If you find yourself struggling with the question of what is fair for your beneficiaries in your estate plan, a Board-Certified Estate Planner can help. If you’d like to have a conversation with ours at HM Law, just send us a note. Let’s talk!

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