How ‘Fair’ is your Estate Plan?

As financial planners, we frequently encounter families grappling with the complexities of estate planning. One of the most common dilemmas is the question of “fairness” when it comes to how assets will be divided among heirs. Many people instinctively assume that fairness means equality—splitting assets into equal parts, each heir getting the same as the other. However, in the world of estate planning, fair doesn’t always mean equal. This is an important distinction to consider.

How to Split Inheritance Fairly

Determining how to divide an inheritance can be a deeply personal and sometimes challenging decision. Fairness in estate planning is subjective and varies depending on individual circumstances. Here are a few considerations when deciding what fairness means for your family:

Consider Financial Need

Not all heirs are in the same financial position. Some may have significant wealth, while others might struggle to make ends meet. In such cases, you may choose to allocate more resources to those who need them most. For example, a child who has dedicated their life to caregiving or one who faces significant financial hardship may warrant a larger portion of the estate than a financially independent sibling.

Factor in Contributions and Sacrifices

If one heir has played a significant role in caring for you or managing your affairs, it may be reasonable to recognize their contributions in your estate plan. This could be a child who provided in-home care, a sibling who handled financial affairs, or a family member who supported you in difficult times.

Maintain Transparency

Open and honest communication with your heirs can prevent conflicts and misunderstandings. If you plan to distribute assets unequally, discussing your reasons with your beneficiaries can help them understand your perspective and reduce the likelihood of disputes later.

Assessing Beneficiary Needs to Determine Fairness

It is possible that in some cases, fairness may truly mean equal. What we hope clients take to heart is the importance of designating beneficiaries based on what they feel is ‘fair’. This is particularly important in situations including:  

Individuals with Differing Needs

When making decisions about how to split an estate, you may want to consider the needs of the individuals involved. Would you be inclined to leave assets differently to two children who have achieved different levels of financial success? Another consideration is whether an individual has special needs or is on assistance programs. Leaving assets to someone receiving government aid may result in a loss of benefits. Lastly, the age of heirs, particularly minors, may warrant leaving assets in a trust with age restrictions before payments would be made where others might receive their inheritance outright. 

Family Dynamics and Relationships

Every family has their own unique dynamics. Some may be more cordial than others, but even the closest families benefit from clear instructions. Should you leave the same amount to those you have infrequent (or zero) contact with as those who are a regular part of your life? Or do you want to leave a larger portion to those closest to you? Another scenario is whether one child has already received financial support during their lifetime in the form of loans or gifts, while the other children did not. Should these situations be acknowledged and “squared” in your documents?

Heirs of Similar Age to You

Are the heirs of your estate a similar age to you, such is often the case with siblings? If yes, keep in mind that assuming you live a long life, your assets will then ultimately pass onto their heirs, and won’t necessarily be used/spent during their own lifetimes. Would you be happy benefiting the individuals or charities that your sibling has selected? More importantly, have they set up an estate plan for themselves? If these questions cause you to pause, consider if you have individuals or charities you would rather benefit directly with your assets.

The Importance of Transparency
Regardless of what you choose, one of the most important steps in estate planning is having transparent conversations with heirs. This can help family members understand the reasoning behind decisions and avoid misunderstandings. Open dialogue ensures that everyone feels heard, which can significantly reduce conflicts later. If you don’t feel comfortable doing this, consider writing a letter that heirs can read after your death that explains your feelings and rationale.

Ultimately, a well-crafted estate plan should reflect the life’s work of the person creating it—and in many cases, that means considering what’s fair to you and not just what’s mathematically equal. A thoughtful, personalized approach to estate planning can provide the greatest benefit to all involved. Reach out to your financial planner to make sure you have the necessary documents in place to reach your goals.

This information references concepts that have legal, accounting and/or tax implications. It is not to be construed as legal, accounting or tax advice, and is provided as general information to you to assist in understanding the issues discussed. Please consult your own attorney and/or accountant regarding the application of the information contained in this communication.