Unequal Inheritance, But Fair
By Matthew A. Ferri, Esq. When can an unequal inheritance be fair? When choosing how to divide up your estate, a seemingly simple choice may be to distribute your children’s inheritances evenly. But what happens when life hits your family unexpectedly? You may wish to give one child a larger inheritance than others, or to cut out a child completely. Known as “disinheriting” a child. There can be situations in life where leaving unequal inheritances to your loved ones is better suited for your family.
Can Unequal Inheritances Be Fair?
Doing what is “fair” does not have to mean equal. You may want to give more or solely to one child than the others. If one of your children was constantly the one who took care of you, perhaps you may want a larger inheritance to them as a token of appreciation. Or, if a child has special needs and will likely require extra care, you could decide to leave them a greater amount than their siblings, so they will have the resources they need. Additionally, you may have a child who won a large amount in a lottery or makes considerably more than their siblings. They would theoretically have less of a need for an inheritance and may want to forgo it all together. Because everyone’s family circumstances are different, your plans need to be customized so they work best for your needs.
Alternatively, you may want to give less to a particular child or disinherit them, again depending on the circumstances of your family. You may have an estranged relationship with a child, and not want to leave them anything. Or, as a different approach to an earlier example, if you have a child who has special needs, and is receiving benefits, you may want to leave them less. That way they don’t lose access to their benefits and use their inheritance to supplement when needed. Another example could be if you have a child who has an addiction, you might not want to leave them the means to support that habit. Working with an estate planning professional can help you plan for these, and other challenges, that result in your children receiving different or unequal inheritances.
Equal Inheritance / Unequal Access
Another way an inheritance can be unequal – and another place you can customize your plan to your needs – is in the access you give your children to their inheritance. By working with an estate planning attorney, you can shape your plan stating when and how your beneficiaries inherit. If they are fiscally responsible, you could consider giving to them outright or in a trust share with creditor protections that they are in control of.
If they are minors, have special needs, or you believe them to not be ready, you could leave their inheritance to them in a trust share that someone else is in control of until an age you deem appropriate for them to take over, if ever. Or there can be some combination based on each child’s varying needs and responsibility levels. By working with an estate planning professional, you can learn different approaches to determine what works best for your family.
Disinheriting a family member can be more complicated than it might first appear. The process involves terminating the legal rights of inheritance held by your family members. If not done correctly, it can be ineffective, or have a different result than you anticipate. You must also decide if you are only disinheriting the immediate family member, or all of that family member’s descendants as well.
There can be many reasons to disinherit a family member. Most think of a falling out between parent and child. However, that is less common than disinheriting for tax planning, disability benefit protection, or legacy planning. A special needs child may need to be disinherited in your estate plan in order to protect his government benefits.
In many cases it may be better to leave a small inheritance than nothing at all. If you leave a small inheritance with a no contest clause, you may prevent conflict after your death. A child may do nothing rather than risk losing a small inheritance. Whereas, a child who receives nothing, has nothing to lose, and may bring a legal challenge to your estate plan.
“If” and “May” – Customizing An Unequal Inheritance
“If” and “may” intentionally appeared many times throughout this piece. That is because no two families, and no two children, are exactly the same. Estate plans should not be based in a one-size-fits-all approach. They should be customized to you – to your needs, to your family’s circumstances. Because if they are not, they won’t work. Especially if you are considering leaving unequal amounts to your children. You want to make sure you have knowledge of all the potential strategies on how to accomplish your goals. You also want to make sure you have a resource to combat disagreements among family members. An estate planning attorney can help your family avoid the unnecessary conflicts that could stem from siblings receiving differently.
Learn More About Unequal Inheritances
To find out more about leaving an unequal inheritance or discuss a plan that can be tailored to your family’s specific ifs and mays, contact our office to set up a complimentary initial consultation at (248) 409-0256.
About the Author
Matthew A. Ferri, J.D., M.B.A., is the Founder and Principal of Life Focus Planning, a Michigan based estate planning law firm. He is an estate planning attorney with offices in Bloomfield Hills, Michigan and Shelby Township, Michigan. His expertise includes advanced estate planning, elder law, Medicaid planning, Veterans benefits, special needs planning, wealth transfer planning, and business planning. During law school, Matt focused his studies on business law while simultaneously earning his MBA. Shortly after graduation, Matt started his own firm with the goal of helping individuals and their families develop estate plans that work. He received the rating of AV Preeminent® by Martindale-Hubbell: The highest peer rating standard. This rating signifies that a large number of his peers rank him at the highest level of professional excellence for his legal knowledge.