Key Takeaways
- Fair doesn’t always mean equal. Leaving your children different amounts can be the most loving choice for your family.
- Common reasons include a child’s financial or health needs, help you’ve already given, and a child whose living depends on the family farm or business.
- For a child with a disability, a Trust designed to protect their benefits is usually better than leaving money to them directly.
- Your plan can include rules that protect each child’s inheritance from risks like divorce, lawsuits, or overspending.
- Explaining your reasons, ahead of time or in your plan, can spare your children years of hurt and misunderstanding.
In this post
- Why Fair Doesn’t Always Mean Equal
- 6 Reasons to Treat Your Kids Differently in Your Estate Plan
- Protecting Our Kids From Threats
- Involve Your Kids in the Planning Process
- How We Can Help
- FAQs
Why Fair Doesn’t Always Mean Equal
We have a common saying with our kids, “Fair doesn’t mean equal.”
Many of us want equality to be synonymous with fairness — maybe because it seems easier to make things equal than to navigate the complexity of fairness. But think about raising kids. Did you make sure everything was equal?
I doubt you kept track of each dollar spent to make sure it was the same for each child. One child may need braces, while the other has straight teeth. One may need money for music and sports, while the other doesn’t have an interest in those types of things. One child could have health issues and another doesn’t. One could need help with college, while another gets a scholarship. We provide our kids with what is appropriate and what we think they need, regardless of whether it is equal.
And the same should be true of your estate plan. In your Will or Trust, it is okay to treat your children “unequally” when that really is the fairest approach.
6 Reasons to Treat Your Kids Differently in Your Estate Plan
Here are six situations in which you might not want to leave your kids equal amounts in your plan:
- Greater financial need. One of your kids may need more help financially. Kids are not equal in terms of their financial success or ability to succeed in a career. One of them may simply need more than others because of their financial situation.
- Health needs. A child (or even a grandchild) may have health needs that result in increased costs. Health issues can also limit one’s work options or earning potential, therefore making their need for financial assistance greater.
- Protecting a child’s benefits. If a child with a disability receives needs-based government benefits, like Medicaid or SSI, leaving money directly to them could cause them to lose that help. Instead of an outright inheritance, many families leave that child’s share in a Trust designed to protect their benefits (often called a supplemental needs Trust). The money can then pay for the extras that make life better without replacing the support they already receive.
- Some are better stewards. If one child has consistently made bad financial choices, and you have repeatedly bailed them out, it might make sense to leave them less because you are not confident they would use it well. Or, if you do decide to leave them a similar amount, you may want to take steps to protect their inheritance with specific rules, and someone to help manage it for them. (But not a sibling!)
- Early inheritance. Quite often adult children have a significant financial need and parents give them substantial help. After this happens, it might be good to consider adjusting the amount that child would receive in an inheritance. When this situation occurs, without adjusting the amount left in the estate, the child who didn’t need help often feels they are being punished for never needing help.
- Family farm or business. One child may rely on the family farm or business for their livelihood. If one child has spent a lifetime helping you grow your farm or business, it may be best to leave them more of the total estate so their livelihood is not negatively affected. Splitting farmland equally can leave the child who farms renting from their siblings, or facing pressure to sell. There are ways to recognize every child while keeping the family farm together.
Some people still can’t get over the “unfairness” of leaving “unequal” amounts to their children. If you decide to leave equal amounts to each child, we encourage you to consider leaving specially tailored rules for each child, so the inheritance can be handled more fairly.
Protecting Our Kids From Threats
Another important part of an effective estate plan is helping protect our kids from threats. An effective estate plan can include rules that help protect a child’s inheritance from their own spending, a future divorce, a lawsuit, or financial problems. Some kids are more exposed to threats than others. Some kids are better able to handle money than others. The rules you create for your plan need to reflect that. As a parent you should feel free to handle things how you think best, without being tied by guilt into making everything exactly equal.
Involve Your Kids in the Planning Process
We often encourage our clients to involve their family in the planning process. This is especially important when considering leaving “unequal” inheritances. Explaining your reasons to your children, either ahead of time or through your plan, can prevent the misunderstanding and pain that unequal inheritances often cause. Effective communication with your family about why you have decided to do things the way you have can eliminate a legacy of misunderstanding, misinterpretation of your actions, and pain that children experience when parents don’t communicate about the plan ahead of time.
We have seen many adult children upset by their interpretation of their parents’ plan when the parents leave behind no explanation for their rationale, or fail to discuss ahead of time why they’ve chosen to do what they have. Estate plans can seem like a final accounting of a parent’s love. Because of this, it is really important to do the hard work of communicating with your family, either ahead of time or through your plan.
How We Can Help
As with many estate planning matters, this is a complicated one with best solutions varying from family to family. We can’t possibly cover all the nuances in one blog post. Edwards Group’s planning process walks families through difficult decisions, like whether to leave equal amounts to each child in a Will or Trust. You have the knowledge about your unique family. We are the experienced guide that helps create an effective plan based on that knowledge.
If you’d like to learn more about creating an effective estate plan, we encourage you to check out an upcoming workshop. They are a great way to learn about holistic, effective planning at every life stage, along with a great way to get to know us better!
If we can be of assistance to your family, please give us a call at 217-726-9200.
FAQs
No. Illinois law generally lets parents divide their estate among their children however they choose. What matters most is that your Will or Trust clearly says what you want, and that you consider explaining why.
It can be. Many parents choose to recognize a child who gave years of time, care, or work. Talking with all of your children about the reason can help the others understand it as gratitude, not favoritism.
Many families do. Your plan can adjust a child’s share to account for large gifts or loans you made during your lifetime. That way, the child who never needed help doesn’t feel penalized for it.
Leaving money directly to a child who receives needs-based benefits, like Medicaid or SSI, could cause them to lose that help. Many families instead use a Trust designed to protect those benefits, often called a supplemental needs Trust. The Trust can pay for extras that improve their quality of life.
The best time is while you can explain it in your own words. Some parents hold a family meeting, and others write a letter to keep with their plan. Either way, your children hear your reasons from you, not from their own guesses.
Leaving the farm to that child and other assets to the rest is one approach families consider. Splitting the land equally can leave the farming child renting from siblings or pressured to sell. The right answer depends on your land, your other assets, and the people you love.
Yes. A Trust can leave each child the same amount while setting different rules for each one. For example, one child’s share could be paid out over time or managed by someone else.