Every estate planning attorney has conversations with clients about how adult children should inherit. While most assume siblings should inherit equally, equality is not always appropriate in many situations. There are many situations where an equal inheritance might be unfair, says a recent article, “How Should Your Children Inherit? 4 Scenarios Where ‘Equal’ Is Not Appropriate,” from Kiplinger.
The Caretaker Child Lives With the Parent. When one of the children lives with the parent and has taken on most, if not all, of the responsibilities, it may be fair to treat the child differently than siblings who are not involved with the parent’s care. Taking care of paying bills, coordinating health care appointments, driving the parent to appointments, and being involved with end-of-life care is a lot of responsibility. It may be fair to leave this child in the family home or leave the house to a trust for the child for their lifetime. The parent may wish to leave the caretaking child a more significant portion of the inheritance to recognize their additional help.
A Special Needs Child. If the parent has been the primary caregiver for a special needs child, the estate plan must consider this to ensure the child will be adequately cared for after the parents die or are unable to care for the child. Depending on the child’s government benefits, this usually means the parents need to have a Special Needs Trust or Supplemental Needs Trust created. Most government benefits are means-tested. To remain eligible, recipients may not have more than a certain amount of personal assets. The Special Needs or Supplemental Needs Trust could receive more or less than an equal amount of the estate the child would have inherited.
In this scenario, siblings are generally understanding. The siblings often know they will care for the family member with special needs when the parents can no longer provide care and welcome the help of an elder law estate planning attorney to plan for their sibling’s future.
An Adult Child With Problems. It’s usually not a good idea to leave an equal portion of an inheritance to an adult child with mental illness, substance abuse, a divorce, or a life-long history of making bad choices. Putting the money into a trust with a non-family member serving as a trustee and strict directions for when and how much money may be distributed may be a better option. In some cases, disinheriting a child is the unpleasant but only realistic alternative.
Wealth Disparities Among the Siblings. When one child has been financially successful and another struggles, it’s fair to bequeath different amounts. However, wealth can change over a lifetime, so review the estate plan and the wealth distribution regularly.
How To Decide What Will Work For Your Family? Every family is different, and every family has different dynamics. Have open and honest discussions with your estate planning attorney, so they can help you plan for your family’s situation. If possible, the same frank discussion should take place with adult children, so no one is surprised at a time when they will be grieving a loss.
Reference: Kiplinger (Dec. 18, 2022) “How Should Your Children Inherit? 4 Scenarios Where ‘Equal’ Is Not Appropriate”