Estate planning attorneys aren’t often asked to create estate plans treating heirs unfairly. However, when they do, it usually is because a parent is estranged from one child and wishes to leave them nothing. Regarding estate planning, equal isn’t the same as fair, explains the article “Are Unequal Inheritances Fair?” from Advisor Perspectives.
An example of this can be seen in the case of a widow with four adult children who asked an estate planning attorney how to distribute her assets. Three of her children were high-income earners, already building substantial net worth. A fourth child had mental health issues, limited education, had been in and out of jail, and could not hold a job.
She understood that her fourth child needed financial stability; the others did not. She wanted to provide some support for him but knew any money left directly to him would be gone quickly. She was considering leaving money for him in a trust to provide a monthly income stream but also wanted to be fair to the other three children.
The trust would be the best option. However, there were problems to consider. If the estate were to be divided into four equal parts, the fourth child’s share of the estate would be small so that trustee fees would take a significant amount of the trust. If she left her entire estate for him, he’d likely have funding for most, if not all, of his adult life.
The worst thing the mother could do was to leave all the funds for the fourth child in a trust without discussing it with the other three siblings. Unequal inheritances can lead to battles between siblings, sometimes bad enough to lead them into a court battle. This is often the case where others believe one child to have unduly influenced a parent when they have inherited all or the lion’s share of the estate.
Sibling fights can occur even when the children know about and understand the need for unequal distribution. The children may suppress their emotions while the parent is living. However, emotions may fire at full throttle after the parent dies and the reality sets in. Logically, in this case, the three successful siblings may well understand why their troubled sibling needs the funds. However, grief is a powerful emotion and can lead to illogical responses.
In this case, the woman decided to leave her estate in equal shares to each child, giving the three successful siblings the option to share part of their inheritance with their brother. She did this by having her estate planning attorney add language in the will stating if any child wanted to disclaim or refuse any of their inheritance, it would pass to a trust set up for the troubled sibling. This gave each child the opportunity to help or not.
Was it a perfect solution? Perhaps not, but it was the best possible solution given the specific circumstances for this family.
Reference: Advisor Perspectives (Aug. 22, 2022) “Are Unequal Inheritances Fair?”
