Many people struggle with how to divide their estate among heirs because they want to be fair to all. The most common solution is to divide all assets equally. However, there are some situations when the determination of fairness is not the same as equal percentages.
What Should I Consider in my Estate Distribution?
Some of the factors to take into consideration:
- Have heirs benefited from the estate prior to death?
- Family dynamics and relationships
- Differing needs or wants among the heirs
How Heirs Benefit from an Estate Prior to Death
House Purchase: You help an heir make a down payment on a house and are never paid back. None of the other heirs received either cash or property of equal value. The down payment can be considered an advance on that heir’s inheritance and their percentage of the estate is reduced accordingly.
College: Child #1 receives a scholarship that covers all the costs of college, and the parents paid $80,000 out-of-pocket for child #2’s education. They may consider this an advance on child #2’s inheritance and make adjustments to how the estate is split.
Special Needs: What if one of the heirs has special needs (care, medical, etc.)? If that heir is not able to provide for themselves, allocating a larger percentage of the estate to a trust for their benefit is worth consideration. This may alleviate the concerns of other heirs as to how they will be cared for and supported.
Controlled Access: How assets are distributed to heirs does not need to be the same. You do not have to give it to them all directly. If you have concerns that an heir will not use the funds wisely, may be negatively influenced by others and taken advantage, you can leave their portion to a trust or restrict how the funds are paid out.
Different Assets: Since some assets are not easily divided and/or some may mean more to one heir than another, they do not have to be divided equally. If one heir wants the beach house, then the other heirs may be given a larger percentage of the invested assets to offset their portion of the value of the beach house. They all get the same amount but comprised of different assets.
As you are contemplating the division of your estate, it is helpful to have a family discussion. It may be difficult and some children do not like talking with parents about mortality. It can be very insightful to ask children what is important to them. It may be something you would not have considered, such as dad’s old fishing pole. It may not be worth anything and looks a little shabby but the memories that child has fishing with dad means more than the value of the fishing pole. While this would not be put in the will, it may spur dad to give the fishing pole to the child when they are done with it verses giving or throwing it away.
Also, if more than one child wants the same thing then there can be a fair division of items, which can avoid conflict at estate distribution.
Communicate Your Estate Decisions
Once you have finalized the estate documents, have a discussion with the heirs on your decisions in regards to the distribution of the estate and why. This will allow them to ask questions and avoid any surprises at your passing. This can avoid conflicts during estate distribution that can cause hard feelings among heirs.