Are Equal Shares in Estate Plans Always Appropriate?

/ April 23, 2012

Macarons - iStockI have helped many people draft their estate plan documents and most have been traditional in the sense that they want to be “fair” to their descendants. If there is a spouse all goes to them, next to their kids in equal shares. Further, the testator (persons for whom the estate plan has been drafted) tend to leave their estate per stirpes. “Per stirpes” is Latin for “by representation.” For example, if a person has three children and leaves their estate to their “then living descendants, per stirpes,” but one predeceases the testator leaving three children of his/her own, then the testator’s other two surviving children will inherit 1/3 of the estate each while the deceased child’s children will inherit the other 1/3 in equal shares.

When drafting estate plans, I believe the testator should not necessarily feel obligated to give equally to family members. There may be several reasons to not do so, including:

  • one child has been more successful financially;
  • the testator does not know how many children each of their children will have;
  • it is unknown whether their children will leave anything to their grandchildren;
  • one child may become a caregiver for the testator;
  • one child may have been given generous support during the testator’s lifetime (college paid, for example);
  • one child may have a disability

Furthermore, financially well-to-do kids tend to do “good” with the money, instead of squandering an inheritance. Also, if it is known ahead of time within a family that bequests will or may not be distributed equally this may encourage children to visit, call, and provide other attentive services.

If parents feel equally altruistic about all of their children, it should follow that parents distribute bequests in a manner that equalizes their children’s after-bequest income and wealth. Poorer children should receive larger bequests and wealthier children smaller. However, according to many reports, roughly two-thirds of all parents distribute their estate almost equally to their children. Conversely, studies indicate that approximately three-fourths of parents who make lifetime transfers to their children give unequal amounts. Why would they make cookie-cutter bequests upon their departure?

I think it is a great idea for the gifting person to explain their rationale to their children, as it tends to prevent battles later. If you are considering giving your children unequal shares but  are afraid that your decision will be misinterpreted or create friction between your children, discuss your decision and reasoning with them. In an open and candid discussion, you may learn that your children agree with you, or that your suspicions of potential arguments are confirmed. In the latter case, you have time for damage control.

The decision to give unequally is personal, and depends on the facts and circumstances in each family. Equal gifting remains popular and will most certainly continue to dominate wills and trusts. But with the modern family comes modern approaches to estate planning. Parents should not feel obligated to include anyone in their estate plan, be it grandchildren, great grandchildren, or even children, for that matter.

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