The Hazards of Unequal Inheritance

When many people begin the estate planning process, they sometimes believe that they are doing the right thing by giving more to one child than the other. One child may be making more money, is more successful, or has married into wealth of his or her own. Parents think that giving an unequal share of the estate to one child over the other is the best way to rectify the situation; however, unequal inheritance comes with hazards that parents may not consider when creating an estate plan.

Punishing Success

By giving one child an unequal share of the estate, it punishes the success of others. In addition, with today’s economic and financial climate the success of one child today does not guarantee it for life. A lot can change over the course of five, ten, or twenty years to your children financially. The more successful child could fall on hard times, and the less successful child could start doing much better financially.

Creating Family Drama

More importantly, unequal distribution of an estate can lead to resentment among children after their parents die and create a lot of family drama. At the very least, the more successful child is going to be asking why, and questioning whether the parents did not love them as much as the child that got more. Unequal distribution can lead to fights among siblings, and accusations of undue influence could be raised to challenge the will.

Fights among siblings can lead to long, protracted legal battles in probate court that can destroy a family and burn through the estate assets. Some estate battles take years and the estate only serves as a legacy of pain.

Creative Solutions

One solution that some parents attempt when unequally distributing an estate is to discuss with their children the reasons behind it. Explaining why there is an unequal distribution can at the very least eliminate the questions of “why” after the parents have passed away. Typically, this can temper some of the family anger but in the end the parents are still punishing the success of some of their children.

Another way to account for children’s differing financial situations without showing favoritism in the will is to use an irrevocable trust. The parents appoint a trustee that is not one of the children, and they place the assets of the estate into the trust. The trustee then has the authority to make distributions to the children based on need or other specifications left by the parents. This way, the child that is having more trouble financially can be supported by the trust at an unequal rate to their siblings. In the future, if the financial situation flips for the children the trust can then provide for the child that was more successful at the time when the parents created the trust.

The irrevocability prevents the children from opposing the trust instrument and keeps the estate out of probate court. It can provide the flexibility of unequal distribution without the hazards of explicit unequal division of assets in a will.

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