Ask Carrie: Carrie Schwab Pomerantz - The Personal Side of Money

Dividing Up Your Estate: Does It Ever Make Sense to Split It Unequally?

June 23, 2010

Dear Carrie,

I have two grown sons: one's a corporate attorney and one teaches English at a public high school. Needless to say, their incomes are quite far apart. I'm tempted to leave my less-well-off teacher more money, but is this a good idea? And if so, how's the best way to do it?

—A Reader


Dear Reader,

Your excellent question raises some important issues about fairness and about how to handle estate planning—particularly the importance of communicating with your heirs about your wishes and intentions. Even the most generous of impulses can be misinterpreted, especially those involving family and money.

Equal Is Easy (And Probably Right)
I'll start by saying that my natural inclination is for parents to treat their children equally. I completely understand your impulse to provide extra assistance to your son with fewer resources, and that ultimately may be the best decision—but I caution you to proceed with care.

First understand that both of your sons may easily perceive their inheritance as a symbol for your love. Your sons are adults, but it’s amazing how childhood insecurities can linger. A perceived slight can trigger resentment that can last for decades.

Also, things can (and do) change. One son may be earning a lot more now, but it’s impossible to accurately predict the future. 

Talk Can Lead to Consensus
If you decide that giving more to your son the teacher is really the right thing, explain your plan to both sons now, starting with the wealthier son. Be sure to present it as an idea—not a fait accompli.

Hopefully he'll be receptive and understanding. Then you’ll be able to discuss your plans with your other son. A third conversation with both of them should ensure that the idea is acceptable to all concerned.

Of course, if your wealthier son is unhappy, you've got some rethinking to do. One possibility is to treat the two equally in your will, but make annual gifts to your son the teacher to help him out now (or perhaps to his children, such as with contributions to a 529 college savings plan). Or you might come up with an estate plan that provides more money for the teacher, but evens things out by bequeathing some family heirlooms or other non-financial assets to your wealthier son.

I'll add here that if your wealth is substantial, now is an excellent time to talk to an estate planning attorney to ensure you won't run into a big estate tax bill. Although estate taxes were repealed at the end of 2009, they will return in 2011. Up to $1 million is free of tax, but anything above that is taxed up to a maximum of 55 percent depending on the size of your estate. So plan ahead.

As for your children, I know you're trying to be fair, so think carefully before you decide to give one of them more money than the other. After all, the last thing you want to do is to foster resentment that could live on for years after you've gone. Good luck.  

Important Disclosures
 
The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The type of securities and investment strategies mentioned may not be suitable for everyone. Each investor needs to review a security transaction and investment strategy for his or her own particular situation. Data contained here is obtained from what are considered reliable sources. However, its accuracy, completeness or reliability cannot be guaranteed.

(0610-3874)



The information on this website is for educational purposes only. It is not intended to be a substitute for specific individualized tax, legal or investment planning advice. Where specific advice is necessary or appropriate, consult with a qualified tax advisor, CPA, financial planner or investment manager.

Retirement

Learn how to manage your savings no matter where you are in life.

Read More

Calculators

Use savings and debt calculators to help you reach your financial goals.


Learn More