Bulletin
Investor Alert

New York Markets Open in:

NerdWallet

June 4, 2020, 12:02 p.m. EDT

Should you be ‘fair’ with the inheritance you leave to your kids?

Leaving more to heirs with greater need can cause resentment, but so can equal distributions of your estate

new
Watchlist Relevance
LEARN MORE

Want to see how this story relates to your watchlist?

Just add items to create a watchlist now:

or Cancel Already have a watchlist? Log In

By Liz Weston


Paramount Network / Everett Collection

This article is reprinted by permission from NerdWallet .

Your estate plan may be your last words to those you leave behind. If you’re a parent, you should think carefully about the message you’ll be sending.

Parents who leave their children unequal inheritances risk fueling family feuds. But strictly equal bequests also can cause resentment if the heirs don’t see the distribution as fair.

“Money can cause family discord, and you want to make sure that you are thinking through this and keeping sibling relationships intact,” says Colleen Carcone, co-author of “Principles of Estate Planning” and director of wealth planning strategies at TIAA.

Define ‘fair’

Carcone recommends her clients first think about how they define “fair.” For some people, fair means an equal dollar amount. Others may want to adjust the distribution to deduct financial help they’ve already given , for example, or to leave more to heirs with greater need. Parents commonly want to leave more to children who run the family business or who help care for the parents in their later years, says Marianela Collado, a certified financial planner with Tobias Financial Advisors in Plantation, Florida.

Each approach has its merits — and problems. With an equal-dollar distribution, heirs may resent their wealthier siblings for getting money they don’t “need.” Similarly, children who received less financial help during the parent’s life may resent those who got more if the estate distribution doesn’t reflect that imbalance.

Read: You need to make a will now more than ever

Unequal distributions can cause hard feelings, as well. The person getting less than others may view it as a punishment, especially if the amount was docked to reflect past financial help or to account for personal wealth. (One inheritor I know refers to this as “the success tax.”)

What matters is how your decision is likely to play out  given your family’s dynamics , and that may be differently than you expect.

Ask your kids what they think

Carcone once had clients whose son was much wealthier than his siblings — or his parents, for that matter. She encouraged the clients to discuss their estate plan with their son, and they discovered he didn’t want what they thought.

“They had been thinking, ‘We’re just going to divide everything into thirds because we have three kids and we love our three kids equally,’” Carcone says. “But he said, ‘I would rather have the money go to my siblings, but what I’d really like is that watch collection that Grandpa left you.’”

In other families, anything that’s not a strictly equal distribution will cause discord. Leaving one child more than another would ignite those “Mom (or Dad) always liked you best” rivalries that can destroy sibling relationships.

Related: Why your estate plan is not as buttoned up as you think it is

Page 1 Page 2
This Story has 0 Comments
Be the first to comment
More News In
Retirement

Story Conversation

Commenting FAQs »

Partner Center

Link to MarketWatch's Slice.