Dividing your estate among family can be complex and at times, difficult. Quite often, equally dividing assets among heirs makes the most sense. However, there may be some cases in which giving each child an identical inheritance might not be the best decision.
Keeping in mind the distinctions between leaving an equal inheritance, in which each child receives an identical amount, and an equitable inheritance, in which each child receives what is appropriate, provided the circumstances, may help you decide what’s best for you and your family.
When each of your heirs has similar lifestyle needs, received similar support in the past from their parents, or other family members, and are mentally and emotionally responsible, it may make sense for each child to receive an equal inheritance.
If your legacy involves real estate and other tangible assets, you will need to determine a dollar amount for each and decide what makes the most sense to leave for each heir. Location may also be a deciding factor in whether or not an heir receives a home, for example. If one lives nearby and has always enjoyed that house it could make the most sense to leave it to them. Any existing differences in values of properties could be left in cash or other assets.
Less pleasantly, you may decide to leave an equal inheritance to your heirs in order to avoid any costs of conflict, both emotionally and financially. The best way to decide who receives what may be to weigh the likelihood of an heir involving litigation in the estate. If that becomes the case, your assets may also end up differently than you originally intended.
Leaving Varying Amounts
Equally distributing your assets to your heirs may not always be the best option or feel right. For example, one of your heirs may be acting as your caregiver and you feel they should be rewarded for their time and efforts. Alternatively, one heirs may have received more throughout their lifetime than another - whether it was a wedding, grad school or a down payment on a house. In this case, it may be advisable to leave an equal inheritance to your other heir(s) and a smaller amount to the heir you previously gifted money. This would fall in the equitable, not equal guideline of distribution.
There are a number of circumstances in which you may consider leaving different amounts to your heirs. If your heirs are your children and you have a blended family, you may have one child who can expect to receive support from another parent; or perhaps you run a family business and one child owns a larger share than others; alternatively, you may have a financially irresponsible child or simply one that can’t be trusted with an inheritance.
Regardless of the division of assets, it’s always important to communicate your intentions to all those involved so that your requests are clear and there are no surprises.
How to Protect Your Estate
By leaving unequal amounts to your heirs, you put yourself at a higher risk of them being unhappy or unsettled with the decision. In order to minimize the chances of one of your heirs contesting your will in court, as well as their chances of winning if they do, there are a few options available to you.
First, a non-contestability clause states within your will that any inheritor who takes your will to court forfeits any bequests. In order for the clause to be effective, your heirs have to have something to lose and you’ll need to leave them enough that they likely have more to gain by accepting the outcome than by going to court.1
This may not be your most favorable option but it may mean the best chance of keeping your will intact. This type of clause varies by state so it’s important to check your state’s laws before considering this route.
Other ways to avoid challenges with your will include:
- Having your doctor as a witness when you sign your will in order to invalidate claims of lack of capacity.
- Excluding each of your heirs from the will-writing process to invalidate claims of undue influence.
- Discussing your will with each heir to explain your reasoning and avoid surprises.2
If a lawsuit does arise regarding your estate, it is most likely to end in a costly settlement that will undoubtedly alter your estate plan. Funds will likely end up in a different place or with a different person than you had originally proposed.
The Bottom Line
Regardless of how, and to whom, you leave your inheritance, it’s important to keep in mind that it is your wealth and you have the right to do with it what you choose. That being said, whether you leave an equal or equitable inheritance to your heirs should depend on your existing relationship and the lifestyles they have led. If perceived inequality takes place because of uneven distribution of your assets, the likelihood of legal mediation increases and it’s up to you to decide how significant that risk may be.
Planning your estate carefully may not be easy, but it is imperative. It’s also important to meet with a knowledgeable and trusted advisor should you have questions or concerns about creating your will and the options available to you along the way.
This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.