Documenting your rationale

In addition to telling your children why you plan to leave an unequal gift, consider providing a written explanation of your decision that can be attached to your trust or will. Such a letter communicates facts and feelings that are not otherwise included in estate planning documents and may deter an unhappy heir from contesting your will. Consult your attorney about any estate planning letters you intend to leave to ensure you don’t create any confusion in your plans.

Beneficiary designations
Talk to your estate planner and be sure you understand the implications of naming certain children as a beneficiary on a retirement account or life insurance policy. In such cases, those assets would pass to the named child directly and would be excluded from your estate, meaning those assets won’t get divvied up among your heirs.

Even if your child recognizes this was a mistake and wants to redistribute the funds, it can be a costly and difficult issue to fix. Regifting assets to their siblings could trigger gift taxes. Alternately, the child could disclaim part of the inheritance, but that is best done with legal counsel and a full understanding of potential implications.

Alternative gifts
If you’re convinced that an unequal distribution will create a serious sense of unhappiness, consider alternative ways to support a child or otherwise “even things out.” You might consider making annual gifts to a child while you are still alive. In 2017, you can give $14,000 to any number of individuals without having to pay a gift tax.  In fact, you and your spouse may give $14,000 each to the same person without triggering gift taxes.

Another option is to compensate a child for assistance he or she provides you, or seek out other ways to support the family, such as contributions to a grandchild’s college fund.

Another way to assuage a child’s hurt feelings could be to give one child more money while gifting the other one with meaningful family heirlooms or other assets, such as a vacation property or a collector car.

Fewer surprises, less discord
Money issues have significant potential to create conflict, even among the most harmonious families. Clear communication is critical to helping maintain relationships and goodwill among those you leave behind. An explanation of why you made the decision you did can alleviate uncomfortable questions and reduce (or hopefully eliminate) any lingering bad feelings.


Email us now
close slider