Liz Weston: Should you give your kids an equal inheritance?

Your estate plan may be your last words to those you leave behind. If you’re a parent, you should think carefully about the message you’ll be sending.

Parents who leave their children unequal inheritances risk fueling family feuds. But strictly equal bequests also can cause resentment if the heirs don’t see the distribution as fair.

“Money can cause family discord, and you want to make sure that you are thinking through this and keeping sibling relationships intact,” says Colleen Carcone, co-author of “Principles of Estate Planning” and a wealth planning specialist at TIAA.

DEFINE ‘FAIR’

Carcone recommends her clients first think about how they define “fair.” For some people, fair means an equal dollar amount. Others may want to adjust the distribution to deduct financial help they’ve already given, for example, or to leave more to heirs with greater need. Parents commonly want to leave more to children who run the family business or who help care for the parents in their later years, says Marianela Collado, a certified financial planner with Tobias Financial Advisors in Plantation, Florida.

Each approach has its merits — and problems. With an equal-dollar distribution, heirs may resent their wealthier siblings for getting money they don’t “need.” Similarly, children who received less financial help during the parent’s life may resent those who got more if the estate distribution doesn’t reflect that imbalance.

Unequal distributions can cause hard feelings, as well. The person getting less than others may view it as a punishment, especially if the amount was docked to reflect past financial help or to account for personal wealth. (One inheritor I know refers to this as “the success tax.”)

What matters is how your decision is likely to play out given your family’s dynamics, and that may be differently than you expect.

ASK YOUR KIDS WHAT THEY THINK

Carcone once had clients whose son was much wealthier than his siblings — or his parents, for that matter. She encouraged the clients to discuss their estate plan with their son, and they discovered he didn’t want what they thought.

“They had been thinking, ‘We’re just going to divide everything into thirds because we have three kids and we love our three kids equally,’” Carcone says. “But he said, ‘I would rather have the money go to my siblings, but what I’d really like is that watch collection that Grandpa left you.’”

In other families, anything that’s not a strictly equal distribution will cause discord. Leaving one child more than another would ignite those “Mom (or Dad) always liked you best” rivalries that can destroy sibling relationships.

It’s your money, obviously, so you can do what you like. But discussing your estate plan and intentions with your children could give you unexpected insights and may help stave off future problems. If you’re reluctant, ask yourself why, says CFP Hui-chin Chen of Pavlov Financial Planning in Arlington, Virginia.

“If they don’t feel comfortable making (their estate plans) known when they are alive, that might be an indication that they are just sowing seeds of discord for when they are gone,” Chen says.

THINK HARD ABOUT ASKING KIDS TO SHARE

A stumbling block for many parents is what to do with the family home or a much-loved vacation property. Some children may be more attached to the real estate, while others would prefer to have the money from its sale. If you want your children to share ownership, think about how that would work.

“Who’s going to be responsible for maintenance and upkeep and expenses? Do all of the kids have that desire? Do all of the kids have that ability?” Carcone says.

Your kids may have ideas on how they can successfully share the ownership and the costs, or you may get a little preview of the dissent the property can cause. Either way, that can inform your decision.

LEAVE A DETAILED LETTER

Carcone encourages talking to your children about how you’ve divided your estate and also leaving behind a detailed letter explaining the thinking behind your decisions. Such letters can head off disagreements about what you said and what you meant. (As any parent knows, what we say to our children and what they hear can be quite different.)

“Make sure that they understand why you did what you did,” Carcone says. “Nobody wants to leave a legacy of family disharmony.”

This column was provided to The Associated Press by the personal finance website NerdWallet. Liz Weston is a columnist at NerdWallet, a certified financial planner and author of “Your Credit Score.” Email: [email protected]. Twitter: @lizweston.

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