When the children are in different places financially, do you divide your estate according to need?
You have a sizable estate, and you have children who will someday inherit the assets of your estate.
You are preparing the necessary documents to state your wishes for how your estate is divided. But what exactly do you want to happen with it?
In the book The Charles Schwab Guide to Finances After 50, author Carrie Schwab-Pomerantz poses the following scenario: “I’m confused about how to divide my estate between my children, who have different needs and financial resources. Is it best to divide it into equal parts?”
This question is for those who have children at different levels of personal and financial success, and suggests that the parent in this case would want to do more for the struggling child than for the successful one in terms of passing on estate assets.
After stating that the issue is a difficult one to ponder, Schwab-Pomerantz answers her own question:
“I believe it makes a lot of sense for parents to treat their children equally,’’ she writes. “While it is completely understandable to consider providing extra assistance to a child with fewer resources, or for a child with special needs, it’s important to proceed with care.”
She also notes that the status of the children can change over time, making an equal distribution seem like a better idea.
However, “if you do decide to divide your estate unequally, it’s generally best to explain your plan to all of your children now,’’ Schwab-Pomerantz writes. “Be up front about your concerns for all of them, both financial and emotional.”
In the case of unequal distribution, Schwab-Pomerantz said while giving more money to the children who need it the most, the more successful children could get family heirlooms that have emotional value and perhaps great resale value.
In order to make sure your estate wishes are carried out as you want, Schwab-Pomerantz said only an estate planning attorney can make certain everything is legally binding and proper.
Some people choose adult children to serve as executor or trustee for the estate, and Schwab-Pomerantz warns against taking that route. The size of the estate and the complexity of assets are two issues to consider, as are the emotional stability of the family members who will be benefitting from the estate.
“When one person in a family is given authority or power over others, there is always the potential for problems,’’ she writes. “Your children may all get along now, but could that change when money is involved or issues of control arise?”
Should an heir be chosen to execute the estate, you must also consider whether that person is going to be paid from the estate for the services he or she provides.
“Once you make a decision, talk to your children,’’ she writes. “Be open about your estate plan, what they can expect, and why you’ve chosen a specific person. They will be happy to know that you trust all of them with this information and trust that they will honor your wishes without dissention.”
Kent McDill is a staff writer for Millionaire Corner. McDill spent 30 years as a sports writer, working for United Press International and the Daily Herald of Arlington Heights, Ill. From 1988-1999, he covered the Chicago Bulls for the Daily Herald, traveling with them every day through the nine-month season. He also covered the Bulls for UPI from 1985-88, and currently covers the team for www.nba.com. He has written two books on the Bulls, including the new title “100 Things Bulls Fans Should Know And Do Before They Die’, published by Triumph Books. In August 2013, his new book “100 Things Bears Fans Should Know And Do Before They Die” gets published.
In 2008, he resigned from the Herald and became a freelance writer. The Herald hired him to write business features and speeches for the Daily Herald Business Conferences and Awards presentations.
McDill also writes a monthly parenting column for the Herald’s Suburban Parent magazine.
McDill is the father of four children, and an active fan of soccer, Jimmy Buffett and all things Disney.