Deciding how to divide your estate between your children is not always as clear-cut as it seems. An equal division would have you leave each of your children the same amount, but what if one has served as your caregiver for five years? What if one is extremely wealthy, while the other two are struggling financially? If you have four children, who gets the beloved family home or their great-grandmother’s wedding ring?
Experts say that however you decide to divide up your estate, harmony should be a guiding principle. An inequitable inheritance, especially when it comes as a surprise, can cause long-lasting conflict between siblings, and no one wants to leave behind a legacy of family discord.
Here are some ways to ensure that the distribution of your estate is equitable, minimizes conflicts, and follows your wishes.
Figure out what “fair” means
When you consider how your children should share your inheritance, certain situations may call for an equal division of assets. For example, if all your children are in similar economic and life circumstances and you haven’t already given any of them substantial gifts, equal financial distribution may be appropriate.
Alternatively, you may want to factor in the total amount of financial assistance you’ve given your children over their lifetime. In other words, you may want to adjust their inheritance to reflect what you’ve already given them. For example, you may have a child who you gave $50,000 to help pay off private college student loans, while your other children attended state colleges that were much cheaper. You could adjust your financial division to give one child $100,000 and the other two $150,000 each to make the inheritance equitable.
Sometimes people want to leave more money to one child as a reward or a necessity. For example, one child may have sacrificed greatly to provide in-home care for you, or you may have a child with a disability who will need money for care for the rest of their life. You may have created a blended family later in life and want to leave more to your biological children.
These situations can become sticky, but sometimes siblings will understand and even support another sibling receiving a larger share of the inheritance. In other cases, however, perceived inequities can lead to years of sibling disputes. If you’re not sure what will happen, consider making decisions that will create harmony, not conflict, between siblings.
Large family assets
It doesn’t always make sense to divide a large family asset such as a family home or business between multiple children. For example, if one of your children has settled in another state and one has stayed in your hometown, it may make more sense to leave the house to the child who lives locally and give the other child more of your assets to offset the value of the house.
A similar situation could arise with a family business. If one child has made a career in that business while another shows no interest, it could be detrimental to the business to split ownership between the children in the interest of being “equal.” In this case, you could leave the business to the child who works there and give the other child more cash.
Conveying your wishes
While you are of sound mind, clearly define your wishes. You can do this by writing a detailed letter that explains not only what your decisions are, but why you made them. This will eliminate any conjecture about your motivations that could lead to hurt.
Talk to your children. You may find that they are much more understanding than you’ve given them credit for. For example, you may find that a child who already is well-off is more interested in a sentimental family heirloom than an equal share of the assets. Discussions about your estate will help your children understand why you made the decisions you did and stave off potential conflict after you’ve gone. It will also give your family time to accept your wishes. Many times, it is the surprise bequests that create discord.
You also may want to ask your children how they feel about sharing assets. Are they all willing to put the time and money into keeping up the family vacation home? Would one child be willing to allow a sibling to inherit the family silver if they get the grand piano? Heading off potential conflicts through pre-emptive discussion can go a long way toward long-term harmony.
In some cases, you might not want your estate to be divided equitably—however you define that term—between your children. You may feel that one child doesn’t deserve it, or you may be estranged from a son or daughter. While these situations can be unpleasant, it’s worth considering whether an equitable division may be worthwhile to avoid emotional and financial conflict between siblings. An equitable division may also avoid the risk of the “slighted” child suing the estate—a situation where some of your assets could end up in a lawyer’s bank account.