One of the hottest issues I face in preparing wills is the debate of whether to leave assets equally to your kids when circumstances suggest that an unequal division may be more “fair.” There’s no perfect answer. Given the high interest level in this topic, Trusts & Estates magazine covered the debate this month in an article I co-authored with Glenn Kurlander of Morgan Stanley: “What Does It Mean to Be Fair: Two Estate-Planning Attorneys Give Their Views on the Need for Clients to Treat Their Descendants Equally.” Admitting that there’s no clear right or wrong, Glenn and I offer different perspectives. Click on this LINK to read the article.
Kurlander’s portion of the article entitled “Children Don’t Have to Be Treated Equally” analyzes the question through the lens of his own experience as a dad of four, “all of whom are extraordinarily different from one another.” Considering those differences, he justifies some unequal treatment. As an example, he compares the cost of educating a very gifted daughter with the cost of a 2-year junior college education for a learning-disabled son. The daughter’s tuition “exceeded the amount I spent on his tuition by a factor of at least 50…. I’m often asked whether I’ve ever felt compelled to equalize the disparity in educational costs by making a gift to my son of the significant difference in tuition I spent in educating him relative to his siblings. While I’ve thought about it, I’ve rejected that strategy because I believe I achieved the fundamental equality I was seeking.” Kurlander goes on to point out that such a gift would arguably be unfair, “because the ‘disparity’ didn’t go to them. It went to the educational institutions they attended.”
On the other hand, Kurlander does practice rigid equality when it comes to the cost of each child’s wedding. As each of their first three married, he and his wife gave each the same amount of money to spend in their discretion, whether it be for the cost of a wedding or partial down payment on a house. “I’m hoping that the fourth, if and when the day comes, will be the most frugal of all and will get married in my house, with a menu of smoked brisket provided courtesy of his dad’s immense smoker. I won’t charge him a fee for the wedding venue, but to make things equal, I’d probably deduct the cost of the meat from the gift.”
As Kurlander correctly acknowledges, there are times when going “unequal” seems fair. In my portion of the article entitled “Going Unequal Can Be a High Risk Endeavor,” I embellish that point by identifying these circumstances that could call for inequality:
- One is struggling financially and the others are well-off
- One provided care to an elderly parent
- One has kids and the other doesn’t
- One has a disability
- One is fiscally responsible and another isn’t and was repeatedly bailed out over the years
- Leaving the family business to the one who works there
- Leaving the family home entirely to one child.
I caution that going unequal in circumstances like these may seem fair, but unless there’s open communication and buy-in, someone almost always ends up with hurt feelings. As I add, “The child who receives less interprets the inheritance as a proxy for love. No matter how well-off they are, they may still feel less loved.” I put a punctuation point on the risk by quoting an answer from Warren Buffett’s sidekick Charlie Munger when I posed the question at a Berkshire-Hathaway Annual Meeting. Per Munger, “If you’re going to treat them unequally, that is poison.”
So, what do parents do? Again, there’s no perfect answer. But my general view is to feel free to make unequal expenditures while you are alive without keeping score. However, when it comes to the will, leave the estate in equal shares. “A will is a permanent document, and having a forever reminder of unequal treatment can continue to sting.” I’ve seen it ruin relationships among siblings and among cousins. As an advocate for passing down a legacy of family closeness, I’d go to great lengths to put that at risk that over money.
There’s one instance where I suggest the idea of going unequal, and that’s if you want to include grandkids in your plan. If one child has two kids and another child has four, carve off something to go equally per capita to the grandkids. Although not equal by the children’s family lines, it is arguably fair and makes the grandkids feel they were loved equally.
For more Marvin Blum views on this hot topic, click on this LINK to review four past blog posts. My final word: if you decide to go unequal, proceed with caution.
Marvin E. Blum
Marvin Blum (right) and Glenn Kurlander co-authored an article in Trusts & Estates magazine on the debate of leaving a “fair vs. equal” inheritance for your kids.