Dividing Up Your Estate: Does it Ever Make Sense to Split it Unequally?

Townhall.com ^ | June 23, 2010 | Carrie Schwab Pomerantz

[Kaslin]

Dear Carrie: I have two grown sons: one's a corporate attorney and one teaches English at a public high school. Needless to say, their incomes are quite far apart. I'm tempted to leave my less-well-off teacher more money, but is this a good idea? And if so, how's the best way to do it? -- A Reader

Dear Reader: Your excellent question raises some important issues about fairness and about how to handle estate planning -- particularly the importance of communicating with your heirs about your wishes and intentions. Even the most generous of impulses can be misinterpreted, especially those involving family and money.

EQUAL IS EASY (AND PROBABLY RIGHT)

I'll start by saying that my natural inclination is for parents to treat their children equally. I completely understand your impulse to provide extra assistance to your son with fewer resources, and that ultimately may be the best decision -- but I caution you to proceed with care.

First understand that both of your sons may easily perceive their inheritance as a symbol for your love. Your sons are adults, but it's amazing how childhood insecurities can linger. A perceived slight can trigger resentment that can last for decades.

Also, things can (and do) change. One son may be earning a lot more now, but it's impossible to accurately predict the future.

TALK CAN LEAD TO CONSENSUS

If you decide that giving more to your son the teacher is really the right thing, explain your plan to both sons now, starting with the wealthier son. Be sure to present it as an idea -- not a fait accompli.

Hopefully, he'll be receptive and understanding. Then you'll be able to discuss your plans with your other son. A third conversation with both of them should ensure that the idea is acceptable to all concerned.

Of course, if your wealthier son is unhappy, you've got some rethinking to do. One possibility is to treat the two equally in your will, but make annual gifts to your son the teacher to help him out now (or perhaps to his children, such as with contributions to a 529 college savings plan). Or you might come up with an estate plan that provides more money for the teacher, but evens things out by bequeathing some family heirlooms or other non-financial assets to your wealthier son.

I'll add here that if your wealth is substantial, now is an excellent time to talk to an estate-planning attorney to ensure you won't run into a big estate tax bill. Although estate taxes were repealed at the end of 2009, they will return in 2011. Up to $1 million is free of tax, but anything above that is taxed up to a maximum of 55 percent, depending on the size of your estate. So, plan ahead.

As for your children, I know you're trying to be fair, so think carefully before you decide to give one of them more money than the other. After all, the last thing you want to do is to foster resentment that could live on for years after you've gone. Good luck.

[cherry]

I think a nice gesture would to quietly give the teacher son some money NOW..up to $11,000 can be given to each child tax free.. and can be given every year until you pass on....

that would help with his mortage and other bills now when he needs it....then split the money when you die.

[Retired COB]

It is their money and they can do with it what they want, but when your kid asks why Grandma doesn't buy them a car, its hard to explain that they are better off earning the money to buy their own car. Which is what we expect them to do.

You have the wisdom of Solomon. You have some very lucky kids.

[Colvin]

My Father in Law used his Will as get-even time.
My wife was left with little, and my BIW got 2 houses, contents, and made sure his kids got three beach cottages.
My wife has had mental issues since.
Go with even is my advise.

[Colvin]

My Father in Law used his Will as get-even time.
My wife was left with little, and my BIW got 2 houses, contents, and made sure his kids got three beach cottages.
My wife has had mental issues since.
Go with even is my advise.

[Colvin]

My Father in Law used his Will as get-even time.
My wife was left with little, and my BIW got 2 houses, contents, and made sure his kids got three beach cottages.
My wife has had mental issues since.
Go with even is my advise.

[Spudx7]

My Dad's grandfather owned a great deal of property in Minnesota and his will left almost all of it to my dad, his only grandson. The grandfather retired to Florida, remarried and died 3 years later. The wife contested the will and a Florida judge ruled that it was not valid in Fl, so she and her 3 daughters got everything. The land has since been developed into a golf course, a development on the golf course, another development out of town, and all the lake shore property has been sold.

Ouch.

[Hoffer Rand]

It always burns me that there's this assumption in society that children are somehow entitled to get something from their parents when the parents die. We see this in those who think it's ok to skirt around the medicare/medicaid rules to put the parent on state assistance so the kids “get their inheritance.” Everybody’s got their hand out. My parents have a trust which includes properties in several states and I assume an amount of cash. I told them years ago that it's THEIR money and their stuff, they should do what they want with it, leave it to whomever they want, divide it up how they see fit. My BIL and I tied into it over the care of his mom, because he came right out and said we needed to ration her end of life care so there was "as much left over at the end as possible.” Guess who felt entitled to her money? My attitude was that if she spent her last dime the day she drew her last breath, that was a win, because we wouldn't have to resort to a government-run facility, and she would get great quality care during her last years. We won that one. I've got a coworker who is pissed at her now-departed FIL because (gasp) he left more money to HER children than he did to her. And bless her heart, she'd been counting on that money from him to take some vacation or other. So she begrudges the gift given her own children. Unbelieveable the greed and sense of entitlement.

OK, I'll crawl down off my soapbox and go on about my business.

[Howard Morrison]

Give the one who voted for Obama less (redistribution), give the conservative one more! If they both voted for Obama, give the money to your church. If they are both conservative, treat them equally (that’s what they would want).

[whd23]

If people want to leave some of their estates for their family, they should consider skipping a generation and leaving it to the grandkids.

They raised their kids to adulthood, what more can be asked of them?

Mom & Dad worked very hard to accumulate their estate and while us kids may not have had the same recreational opportunities as our friends, we were loved, fed, kept warm, etc. Mom doesn't owe us a thing.

I'm hoping that Mom (Dad has passed already) enjoys herself and leaves this world with just enough to cover her funeral expenses.

[listenhillary]

Hope she is getting counseling. It’s not worth chewing the same shoe for years. Life is for living and you create your own reality by what you focus your attention on.

[FreedomOfExpression]

All of my children are much better off than I am, but I want to leave them an inheritance. I just don't quite how to go about it. I have a terminal lung illness, and I have to make decisions, and I will take all of the suggestions that I can get.

So sorry to hear of your illness.

It is wise to get input, especially from those with some experience in the matter. Hopefully it will help you make a choice about the inheritance that you are comfortable with.

[MamaB]

You are right. Before my husband died in 06, we had been talking about going on a train trip through the NW Parks. He made our daughter promise to go with me. Well, the next year, I talked with her, my grandson, and granddaughter. I told them we could either spend that money which had been set aside for that on the trip or they could have it when I died. Well, all 3 voted for the trip. Best decision of our lives. We went from Seattle to Jackson Hole. Saw scenes that they still talk about and my grandson loved the fact that he celebrated his 21st bd on the train. They sold the company the next year so we are so blessed that we went when we did.

[MEGoody]

My Father in Law used his Will as get-even time.

I have a feeling in your wife's case, he was ticked off about some silly little thing.

With my own father in law, however, I wish he HAD used the will as 'get-even time'. My brother in law raped his sisters and tried to rape my husband. He tortured them anytime he could get away with it until eventually mom and dad figured it out, and he was put away until he reached 18. When FIL split everything evenly, it was a real emotional issue for the siblings.

[passionfruit]

I think there should be considerations for other factors. What if one child does far more for the parent than the others?

Just by way of example, we cared for my mother in law for the last few months of her life. She had cancer. Then we cared for my father in law for the last four years of his life. Not easy, as he suffered from psychological problems and was very difficult.

They left the estate to their two children equally. Hubby was the executor of the estate and trustee of the trust. Hubby's sister suffers from psychological problems too, and she is also very difficult. She was terrified that he may get something more than what she got, so she filed lawsuit after lawsuit, accusing hubby of stealing from the estate, and accusing him of being responsible for his father's death. Most of the estate went to pay to fight these frivolous lawsuits, and most of the remainder went to pay taxes. Very little left for the two to split.

Father in law knew before his death that sis in law didn't want hubby to be the executor. He should have discussed his knowledge and concerns with hubby. He should have been more clear in what he wanted. I don't know how, maybe he should have taped a video to reinforce to his daughter that he wanted his son to be executor. He did tell me before his death that he had been to see the lawyer, and that he made hubby executor of his estate, and that his daughter didn't want her brother to be the executor, but he thought that if she was the executor, hubby wouldn't get anything.

As I age, if one of my kids is there for me a great deal, I will certainly take that into consideration as I rewrite my estate plan.

[absolootezer0]

if you can’t figure it out on your own, leave everything to them to divide as they see fit.

assuming they get along well enough, it should be a no-brainer for them.

[Colvin]

YIKES!
I guess evenly unless the money would got to a socio or phsycopath.
Basically my wife move to the west side of the country, in part to get away from the strange but interesting family antics.

[Fundamentally Fair]

Three other children (two of whom have given him grandchildren) were pretty much given the shaft even though they were the ones who spent time with him at holidays, etc.(the ner do well daughter never called him “Dad” but used his first name).

Did they "give" him children and spend holiday time with him for the inheritance?

[Persevero]

Coldwater Creek, I say a quick prayer for you. Bless you for considering your inheritance even when faced with terminal lung disease.

There is a set amount of money you can give someone per year without them having to declare it on their taxes. I think it is $4000. Someone out there can correct me if I’m wrong.

If I were you, I’d try to disburse some of that even now. Tell them what you are doing and why.

[Persevero]

A good charity would be a better recipient than a cat.

There are some excellent charities.

[Tamar1973]

The fact that one child has more money is neither here nor there. Each chose his life’s work, each made his decision (and each is engaged in honorable work) and in most cases its not appropriate to account for that in the will. There are exceptions, but as a general rule you should not use the will to settle grievances and you should try to treat your kids equally where possible (even when one seems less deserving than another). I’ve heard of people using the will to settle a grievance and its not pretty.

Amen, each child chose their own path in life knowing how much earning power the job might provide and have to live with the consequences or change the situation if they aren't happy with their current jobs.