You have known for a while that every responsible adult should have an estate plan (https://keystoneelderlaw.com/estate-planning/estate-planning-missteps/ ). Determined not to leave your family with burdensome court proceedings and an expensive tax bill, you finally sit down, make a list of your assets, and try to determine how best to set your family up for success after you pass away. Then you have an uncomfortable thought. Your children have unique personalities and needs, but leaving your property to them unequally may look like you are playing favorites.
The truth is that you can love your children equally while drafting an estate plan that treats them differently in light of their needs. Here are some common scenarios in which unequal distributions of property may be appropriate.
Special Needs. If you have a child with special needs, it may be challenging to anticipate what type of care the child will need and what type of government benefits or other public resources may be available. You will probably want to set up a “special needs trust,” not only to ensure that a responsible trustee will pay for your child’s care but also to avoid leaving money that will make your child ineligible for government benefits. However you design the plan, it is likely that you will leave a larger share of your assets to the child with special needs than to his or her siblings. Surely, however, your child with special needs has siblings who love him or her and agree with a plan for long-term care. Take comfort in knowing that you will relieve the other children from any financial burden relating to that care.
Caregivers. As you age, one of your children may need to make sacrifices to help you around the house, pay your bills, prepare meals, and drive you to appointments. You may wish to compensate this child for taking on the extra responsibilities. Some parents choose to do this by leaving a larger share of assets to the caregiver child in a will. Another option is to use a caregiver agreement that provides fair compensation and can help “spend down” resources when required for Medicaid or other benefits to pay for long-term care.
Addiction. For years now, news stories about the addiction epidemic have made a couple things clear. Addiction is a chronic and often deadly disease. Relapses often occur before long-lasting recovery is achieved. If you have a child who struggles with an addiction, leaving that child a lump sum of money may have dangerous consequences. You might consider a kind of trust that would place conditions on any distribution of assets to the addicted child. Conditions could include complete abstinence from alcohol, drugs, or gambling for a certain number of years, along with regular and random testing. Although you would be placing obstacles in the way of one child that your other children need not overcome, doing so may be necessary to save your child from the lethal grip of addiction.
It is important to communicate with your children when making these decisions. If your children first learn of an unequal distribution after your death, there could be hurt feelings or even litigation. Explain to your children the rationale behind your estate plan. Let them know that your intent is to provide support exactly where it’s needed, just as you did while raising them.
If your children all have similar circumstances and income, treating them equally in your estate plan may be appropriate. Keep in mind that you may inadvertently treat them differently if you neglect certain details. For example, your will may leave equal shares of your assets to the children, but beneficiary designations on insurance policies or retirement accounts may treat one child better than others. If your children are younger, it may be wise to hold all assets in trust to be divided equally only after they have all graduated from school and are established in careers. Otherwise, the youngest child may need to spend his or her inheritance on education while the older siblings are free to spend theirs on vacations.
For good reasons, an estate plan must often treat children differently and unequally. Expert guidance on these matters can help.
Patrick Cawley, Attorney