The common thought when estate planning is to split the inheritance equally among your children. The main goal of the distribution is to be fair to each child, but that is not always the case. Sometimes there are special considerations that need to be made for one or more children that result in unequal distribution of the estate.
Circumstances for Unequal Distribution
Splitting an estate equally amongst your children may seem like it makes the most sense, but sometimes circumstances arise that make the situation more complicated. Like many families, oftentimes one child does better financially than the others, or one may be struggling through difficult financial times. In addition, if one of your children has special needs it will require additional planning and resources from your estate to care for them for the rest of their life.
In addition, one child may elect to take care of you or your spouse as you age, and you may want to compensate them for the time and effort that they put in for your care. The same goes for any family members that contribute to a family farm or business that you wish to compensate for their efforts. Simply splitting an estate equally could mean that the children that have been actively invested in the family business may be forced to sell or buy out their siblings just to keep things running.
How to Handle the Situation
There are many different ways to handle splitting an estate into unequal shares for your heirs. Setting up a trust for your assets is a common way to deal with the possibility that your children may need more or less of your estate throughout their lives. A trustee can distribute your assets as they are needed to your children and eliminate the need to make a permanent decision about inheritance based only on a single moment in your children’s financial lives.
In cases where one child is in need of money before you and your spouse pass away, the easiest way to provide for them now is to have that child sign a promissory note. The note is tied to their share of the inheritance from your estate. If the child can pay back their debt before you pass, they can inherit their equal share, and if not the unpaid amount comes out of their inheritance.
The most important thing to do in situations where your heirs will be receiving unequal shares of the estate is to communicate. Talk with your children during the estate planning process and explain your reasoning behind the unequal distribution. The most common reason that children fight over an estate is because they do not understand why one child got more than the other. If you do not feel comfortable having that conversation face to face, consider leaving a letter or video with your estate planning attorney that can be seen after you are gone.