Writing a will with more than one beneficiary can be a complex business, especially when the beneficiaries are offspring. In many families, the clear and obvious solution is an equal distribution of assets.
However, there are also many cases where it makes more sense to tailor the inheritance to the child, depending on individual circumstances. When each child is left what is fair dependent on their circumstances rather than simply equally dividing the pot, this is known as an equitable inheritance.
Dr Edgar Paltzer is an attorney-at-law who counts estate planning among his preferred areas of practice. Engaging the services of an estate planning attorney while writing a will can help prevent issues arising from any genuine or perceived inequalities in inheritance that could result in litigation and family disputes.
The short video attachment looks at challenging an inheritance.
Dividing Equally
On the surface it would seem best to divide all assets equally among offspring. When each child is in a similar financial situation, has received a similar amount of financial support in the past, is equally responsible and has similar needs, there is certainly no reason not to divide things equally among them.
It is most logical to divide assets equally when no child has a serious illness or handicap that requires expensive care, all have demonstrated a degree of responsibility when it comes to money, and all are old enough and financially stable enough to no longer be reliant on their parents for financial support.
When it comes to property, sometimes one child will have demonstrated a particular love of a certain residence. It remains possible to bequeath this residence to that child and still divide things equally in financial terms, provided there are other assets of enough value to create equal shares.
Leaving an equal inheritance can also help prevent future family disputes, which may result in chunks of the assets ending up in the pockets of lawyers rather than with their intended recipients.
The first steps to writing a will are displayed in the infographic attachment to this post.
Reasons to Divide Unequally
There are many potential reasons why a parent may wish to distribute their estate unequally among their children. Good estate planning helps to ensure that this unequal distribution can still be equitable and reduces the chance of one or more children pursuing litigation to demand a larger share.
It may be that one child has previously been gifted or loaned a large amount of money that the other children have not, so the parent may wish to ensure that this is reflected in their share of the inheritance.
One or more children may have provided care for an ill, disabled or elderly parent, and that parent wants to provide compensation for loss of earnings and time (or as a reward). A child with special needs may require more financial support than other children to help with their care needs.
Good estate planning involves discussing factors such as these that may result in an equitable but unequal division of assets while still alive and in sound mind, so each child fully understands why things are being divided as they are.
Some people may wish to add a non-contestability clause; you can learn more about what this is in the embedded PDF.
Setting Up a Trust
In some cases, it may be that parents want to divide equally, but do not want one or more of their children to have unlimited access to the money immediately. This could be the case with young children, or where one member of the family has proven themselves in some way to be irresponsible with money. Trusts are designed to protect the interests of the recipient and can be managed by a trusted, responsible adult until such time as the child is able to manage the funds themselves.