An Unequal Inheritance Could Be an Option for Your Children
For most families who have more than one child, the division of assets in estate planning is usually relatively simple. All of the assets would be divided as equally as possible among your children. However, equal might not always be fair, and more parents are beginning to address the unique needs of their children’s situations through estate planning.
The Caregiver
When parents begin to require more care as they age, there is typically one child who steps up to take on the caregiver role. Many parents believe that this should increase in the amount of assets that the child is given. In fact, a study conducted by Merrill Lynch Wealth Management and the consultant Age Wave found that two-thirds of parents 55 and older said a child who took care of them should receive a larger inheritance.
Ongoing Medical Needs
One child could have a medical condition that requires care for the rest of their lives. That child would have a greater financial need than the other siblings and could benefit from a larger inheritance to provide for their care.
Having Children Later in Life
If you had a child born 10 or more years later than your older children, the younger child might not have received the same financial benefits as the older ones. The older siblings could have been provided with cars, college educations, and weddings that the younger child has not had an opportunity to experience. For this reason, parents might choose to work with an estate planning lawyer to set aside more money for a younger child to provide for those later-in-life opportunities.
The Irresponsible Child
If one child has a history of making poor financial decisions, you might choose to leave the management of their money in the hands of their siblings. Or, funds could be set aside in a trust that has established rules for distribution for that particular child. The trust could be designed to only give the child a set amount of money each month rather than a large amount at once.
Children Who Are Not Yours
If you gained additional children through a second marriage, you might not feel as though the stepchildren should receive the same amount of money as your biological children. However, a study published by the National Bureau of Economic Research found that the longer the stepchildren were in the parent’s life, the more equal their distributions were to those of the parent’s biological children.
An Early Inheritance
When children are given money throughout their lives, some parents consider these monetary gifts to be part of their children’s inheritance. For this reason, parents may decide to leave different inheritance amounts for their children based on what they have already received.
Tax Considerations
The assets left to certain children could cause a tax liability for years to come. For example, if one child inherits a stock portfolio, the earnings could come with additional taxation. Or, if physical property ls left as an asset, the child who inherited that property will need to pay real estate taxes for every year that they own the property. For this reason, parents may account for the increased taxation in their division of assets.
Facilitating an Unequal Inheritance Plan
No matter how good your intentions are, some of your children could resent the way that you distributed your assets. It could help to meet with your children and explain your intentions so that they might understand why you made these decisions. An estate planning lawyer could also be helpful to establish clear directions for the distribution of assets in your plan. Eliminating any potential confusion as to your last wishes may help to avoid possible legal entanglements between your children.
At The Knee Law Firm, we understand how important proper estate planning is in caring for your loved ones after you are gone, and we’ll work hard to understand your particular family’s dynamics to help you create a plan that works best for them. Give our office a call at 201-996-1200 to schedule an appointment with a Hackensack estate planning lawyer.