One of the most common questions estate planning clients ask is how they should divide their children’s inheritance. Many parents believe that dividing an estate equally among heirs seems perfectly fair. However, “fair” is subjective to the receiver. If you aren’t sure how you should divide your inheritance, our attorneys have put together what you should consider before making a decision.
Should I Divide My Inheritance Equally?
Some parents think it is fair to consider various factors before deciding how they want to divide their inheritance. Parents can factor in the tuition they provided for the child who became a lawyer or a doctor or consider the $50,000 loan you gave them to buy a house that they never paid back. If you have significantly assisted one child financially more than the other(s), you might want to take that into consideration when creating your estate plan.
However, dividing your inheritance can be a bit more complicated if a family business is involved--especially if only one of your children works in the business or if the business makes up most of your estate. Some parents like to buy extra life insurance that is payable to children to balance things out. Others ask the child to buy them out to distribute their estate evenly.
If you want to distribute your estate evenly between your children, but you think one child might need more financial support than the other, you can divide 80 percent of your assets among all your children and place the remaining 20 percent in a trust for emergency needs. You can include instructions addressing the circumstances in which the emergency trust can be used.