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When planning the division of your assets, you may believe in a policy of “share and share alike.” This is perhaps the easiest method, and often the way to avoid conflicts and complaints of favoritism. But does equality necessarily equate to fairness? After all, fairness is only relative, especially when one considers factors such as age, talents/skills, interests, needs, and degrees of material success. A more practical approach to the division of assets may be one in which you recognize and compensate for differences in the abilities and needs of your children, even at the risk of producing some conflict. Through your estate plan, you have a chance to provide a measure of fairness that your children may not otherwise have found in their own lives To emphasize the point, consider the following scenarios:
1. Disparity in Age: Assume you have two children, ages 22 and 14. Should you split your estate in half, even though the 22-year-old has been through years of private school education and college and the 14-year-old has just started high school?
2. Income and Net Worth: Assume your daughter becomes a partner in an investment banking firm and quickly builds up $3 million in assets, while your son becomes a sales manager who earns $30,000 per year. Should you leave your estate in equal parts to your son and daughter?
3. Previous Giving: Assume you have given your 24-year-old son $100,000 worth of stock in your business as an inducement for him to work with you. You have not, however, given your 18-year-old son a similar gift. Should you divide the assets in your estate on an equal basis?
4. Investments Given to Children: Assume you have given one child stock in Company XYZ that has risen in value to $300,000. You have given another child stock in Company BCD, which has gone bankrupt. How should you then allocate the balance of your assets?
In all of the above examples, an equal division of property has the potential to create or perpetuate unequal results. This is not to say you cannot choose an unequal result, but it does point out the need for financial and estate planning that leads to reasoned decisions about how you leave your property.
Fortunately, there are ways for you to achieve fairer results. Your first step should be to speak with your children. You may choose to speak with each child individually or hold a family conference. (Obviously, you will have to serve as proxy for your very young children.) Help them to verbalize their hopes, dreams, and expectations, as well as their worries, concerns, and frustrations. By listening first, you may gain valuable insights into how you can divide your estate constructively without causing jealousy and resentment. The decisions may be difficult to make, but in the long run, your family will appreciate your goal of trying to reach an agreement that addresses each child’s individuality.