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Planning for, and then executing, inheritances is often fraught with emotion. Most families choose to leave the inheritance “to my children in equal shares, per stirpes.” Per stirpes is Latin meaning “by the roots” so that if a child dies before the parent, their share goes to their children (if any) in equal shares. If there are no children, then the inheritance is disregarded and their share goes to their surviving siblings in equal shares.
What about gifts to grandchildren? Let’s say one child has five children and the other has two children -- seven grandchildren altogether. When a significant gift is given to grandchildren equally, it is not uncommon for the child with two children to say “well it was my brother’s choice to have five children, why do I have to pay for it?” Good estate planning also looks at inheritances from the heirs’ point of view as well.
We are often asked whether inheritances should be discussed with children ahead of time. While each family has different dynamics, this can end up being the equivalent of giving children a veto power over what you are going to do. For example, if you seek their opinion on an unequal division, you will create a problem for the family if you choose to disregard their input. A better way might be the use of the “soft probe”. Here, you suggest an idea that you have about an unequal division, and then gauge their reaction before making a decision.
For example, where one child is very much better off then another, you might say “You know, your sister Mary could really use our money a lot more...” The wealthy child will generally respond one of two ways. They will either say “Of course, I don’t need it, leave it all to her” and you are off the hook, or they will indicate that they consider anything less than equal shares would be unfair. In the latter case, if you still want to help Mary more, you may give her gifts during your lifetime and keep peace in the family by leaving inheritances equally. You may also pass some accounts outside the estate by naming Mary as beneficiary.
Early on, we learned the estate planning phrase “There’s nothing so unequal as the equal treatment of unequals.” Who has children that are all the same?
Some children have received significant help from parents during their lifetimes while others haven’t. Many parents choose the “forgiveness provision” to address this situation at death, to either “equalize” any gifts made to some children during lifetime with those who did not or, in the alternative, to “forgive” any loans made to children and then make a gift in like amount to each of the other children by inheritance, before the estate is divvied up in equal shares. Lifetime gifts may also be ignored.
Next up is the problem of children who are partially or wholly estranged. Many clients wish to leave them a token amount but there are pitfalls to consider. One who is left considerably less than their siblings will often be angry and upset. They may demand that their siblings disclose what they received and even to pony up their equal share. Not only that, but the burden of telling that estranged child they are getting less and delivering the paltry amount is left to the children who you wish to favor!
In our view, it is sometimes better to leave an estranged child out altogether than to stir up all the issues surrounding an inheritance much smaller than equal.
There are many valid reasons, however, to treat children differently. Some may have alcohol or substance abuse issues, learning disabilities or special needs, they may be immature and irresponsible, poor at handling money or a “soft touch” and, finally, they may have a spouse that dominates them and you do not want to see that controlling spouse get your money.
Sometimes parents leave more to the “needy” child, the old adage being that “the tongue always turns to the aching tooth”. If so, other children’s feelings may need to be addressed. A letter to be opened after your death, explaining what you did and why, may go a long way towards soothing hurt feelings and avoiding misunderstandings, what we term the “emotional legacy”.
Giving thought to your “emotional legacy” may go a long way towards keeping peace in the family.
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