Equitable distributions work in theory, but they are very difficult to pull off.
I understand the theory of estate planning that says treat your children equitably—instead of equally—but I have to tell you it is remarkable difficult to work in reality.
That’s why my opinion is that any estate plan should generally treat children equally, because an inheritance that is unequally shared has the potential to leave deep emotional scars in the children who inherit less–unless there are truly extenuating circumstances, or the reason for the unequal distribution reflects deeply held family values over a long period of time.
I am not talking about children who have medical or developmental issues, which might require special trusts after a parent dies, although if the wealth is large enough, an equal share could still cover that kind of care. If not, in these kind of cases a disproportionate certainly makes sense.
But what I am talking about when it comes to deeply held reasons for unequal distributions are things like these:
- A family with a deep belief in public service creates a trust that provides additional support to children who work for the government, or as teachers, or in some other form of public service. The move is designed to help them afford to take a job that allows them to serve others.
- A family with a farm that has been in the family for generations makes special accommodations to support those children who choose to keep working the farm. The family recognizes that it simply might be more economically advantageous to the kids to sell the farm, if the special bequest is not in place.
- A family eager to encourage future generations to become members of the clergy provides additional financial support to those who choose that path. The reasoning is similar to the first point above.
- When one child goes bankrupt and is unable to fully provide for his or her own children, while their other child(ren) is (are) vastly more successful, parents set up special trusts for the children of the struggling child. This moves is primarily designed to make sure the grandchildren are taken care of.
There are endless variations of reasons to treat children “equitably rather than equally,” but I’ve learned that such approaches “succeed” (meaning that the child or children who receive less, feel no less loved or appreciated) only if the parents make their case repeatedly, with clarity and over a long period of time.
It will almost certainly be more likely to succeed when the arrangement is truly based on core values that have sustained the family over a long enough period of time.
That takes work, planning and organization to have those discussions long enough in advance and frequently enough to counter the otherwise likely damage. There is clearly one of those situations where you cannot communicate too much. And you need to make absolutely certain that your kids aren’t tell you one thing—“no, I think you’re, Sis should get more of the estate than me,” when they feel another. (“How can my possibly think that is fair.”)
In the best of circumstances, the arrangement can serve as a symbol of pride for the values the family would like to champion. But you need to work hard to make sure that it is the best of circumstances.
If you are unwilling or unable to do the work, things will go better (not perfectly, but better) if you treat everyone equally.
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