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Uneven Heirs

Wealth

Dividing your estate equally isn’t always the fairest method By Judy Martel

When it comes to their children, parents don’t want to play favorites. But in estate planning, there are times when it isn’t always fair to be equitable in the distribution of assets. When an heir has complications such as mental or physical health limitations, spendthrift tendencies, or substance-abuse problems, parents will actually be more just with their children if they address these issues in their estate plans, according to Renno Peterson, a Sarasota attorney and co-author of Protect and Enhance your Estate: Definitive Strategies for Estate and Wealth Planning (McGraw-Hill Education).

“There is nothing so unequal as the equal treatment of unequals,” he says. “Kids are different; grandchildren are different.” Even though parents might want to dodge accounting for these differences, he says, setting up the proper estate plan and communicating it to heirs will avoid a potential mess of problems and confusion down the road. Below, Peterson reviews three common family situations where unequal distributions are appropriate, along with the best estate-planning strategy for each:

1 Physical or mental health issues

Most heirs are prepared for the necessity of caring for a sibling with significant health problems and don’t dispute it. There are a few techniques that work well in this situation, including setting up a special trust specifically for the child with health needs. For most situations, Peterson favors putting a life insurance policy inside a trust. “In paying the premiums, you’re buying future care over time,” he notes.

2 Income disparity

One of your children is a surgeon; the other is a high school teacher with five children to support. Should they receive the same monetary inheritance? This scenario can be tricky, because parents don’t want the high-earning child to feel punished for being successful if a sibling receives a bigger piece of the money pie.

PALMBEACHillustrated.com | January 2016

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