How to Divide Your Assets among Your Children

A recent post on cincinnati.com, "Tough task: Dividing assets after a death," asks this question: when it comes to passing assets to the next generation, how should they be divided? Most people believe it's fair to give equal shares to each child. But is that always the best solution or are there exceptions to that rule?

7-6-2016These decisions should be made only after you speak to a qualified estate planning attorney. He or she has the expertise to draw up the will and any other papers concerning bequests. Here are a few family situations where equal bequests are not appropriate.

  • Blended families. Divorce and remarriage can create families where some of the kids have one but not both parents in common, which means that decisions must be made about how to divide up the estate. In some cases, it's not in equal shares. You may factor in any bequests to kids that are planned by the other biological parent.
  • A child or adult with special physical or psychological needs. This includes those with behavioral disorders like alcohol or drug abuse. One solution is to consider a larger portion of the estate for their future care. You might also look into passing equal shares to each child but placing the share of the needy offspring in trust for his or her sole benefit with the intent to provide for that heir's long-term welfare.
  • Plain irreparable relationships. Here, the parents may intend to partially or fully cut that child out of their estate plans. In such a case, the parents should make it very clear in the will that this move was intended. If not, the slighted heir may claim that it was caused by an oversight, error, or loss of cognitive ability.
  • Succession in business ownership. Sometimes a child is active in the business, and it's easy to see who will take over the operation. But what about the remaining kids? Are there other estate assets to equalize the bequests? Or do they come on as silent owners, owning but not having control of running the business? There's no way around it; this is a tough decision that requires thoughtful planning.
  • When a parent needs home-health-care attention. The cost to family caregivers can be enormous for dedicated children or other family members who give up their careers, income and opportunities to become caregivers. The parent may want to reward them with a special share of the estate distribution. One solution is making them the beneficiary of a life insurance policy, payable to the heirs who have earned special consideration. This can leave them with a chosen amount of tax-free cash. To preserve harmony in the family, no one but the beneficiary of that policy needs to know, and if wishes change in the future, a change of beneficiary is easy.

Reference: Cincinnati.com (May 18, 2016) "Tough task: Dividing assets after a death"

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