Sunday, March 09, 2014

Must we leave all of our children the same amount?

A married couple who read the column is nearing the age at which they say they want to get their financial affairs in order, including deciding how they will leave their assets to their three children after the couple dies.

When they drew up their will several years ago, they planned to split their assets equally among their three children.

"But each child's circumstances have changed considerably," the husband writes.

The couple is financially helping out one child and his family because of that child's poor health.

Another child, however, is in good financial shape with a great job and good pension.

"Our third child and family are doing quite well in good part because of our involvement in assisting them in some business dealings."

The parents are torn between leaving their will as is, or apportioning their children's inheritance according to their needs.

"We don't want to be unfair to any of them," writes the husband, "but the one with the least income and poor health can certainly use more money than the others."

The couple estimates that the total inheritance will be a little more than $1 million.

"My wife and I are both getting to an age where we must make a decision regarding this matter soon," writes the husband. "I'm sure we are not alone in trying to solve this sort of thing. But we don't really know who we can discuss it with."

There are financial professionals who advise on wills and estates. But the couple already knows who to go to for a will. The problem is trying to sort out the "fairness" of whatever choice they make.

They are certainly not alone. Many couples wrestle with how to allocate their assets after they die. While it's often possible to leave equal shares of whatever assets there are to any surviving children, there are sometimes mitigating circumstances that cause parents to wonder about the best thing to do.

Some parents who've loaned one child and not others large sums of cash and have never been repaid, for example, decide to deduct that amount from that child's share of an inheritance. If one child provided primary care for an ailing parent, there are occasions when parents decide to leave that child a bit more.

Leaving equal shares might be the simplest thing to do, but since the money belongs to the parents, they have every right to allocate it however they wish. They also have every right to spend as much of the money as they wish (or all of it) before they die.

If they do decide to leave more money to the child with significant health issues, the right thing to do is discuss their plans with all three children. There's no requirement that they do this, but if they truly care for their children and want to avoid creating ill will among them after the parents' deaths, discussing how the assets will be divided before the time comes is the best way to handle the situation. 

Follow him on Twitter: @jseglin 

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Unknown said...

My parents have given different amounts to each of their 3 grown children. Downpayments on homes, remodel costs, college of grandkids. They have just kept track of all of those 'gifts' and each 'gift' will be deducted from the third of the estate that was going to that child. We, unlike the example, don't have radically different lifestyles, just very difference places in our lives. Youngest child still has kids in grade school. Eldest has kids married with grandkids. And middle has kids in college. Equal shares minus any 'gifts' is just easier than trying to guess who will need more when you die.

Anonymous said...

Left unsaid in this dilemma is no mention is made of the kind of relationship the 3 children have with the parents or each other and whether or not, if the parents were to leave the needy child more money than the "well-fixed" children, what would be the feelings involved? In other words, would either of the children who might possibly get less inheritance, get their feelings "hurt" by this arrangement. It's the parent's money - they should distribute the inheritance as they see fit, keeping the circumstances as described in mind. They owe no explanation to the children.

Charlie Seng

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