Sibling rivalry is as old as time. It was true in Cain and Abel’s case, and it’s true today.
One area of sibling discord is inheritance, and as The New York Times recently reported, deciding how to divide assets is one of the most difficult things parents – you – have to undertake. When deciding on how to divide assets, the last thing you want is a fight among your heirs when you are gone.
Of course, you should have a will or a trust that spells out how the assets are to be divided and a trustee to make sure your wishes are followed. But beyond these basic documents, we encourage you to have frank and honest discussions with your children to help ensure that there is harmony when you are no longer around.
Happy family?
It might seem natural that surviving children should inherit your assets equally, but this is where conflict often arises.
A trust that holds all the assets can be ripe for disagreements among siblings. If they had ongoing disputes while you were alive, that will likely continue when you are gone, the Times says.
Separate trusts, instead of one large one, could help smooth friction between heirs. For one, it keeps the siblings from knowing each other’s business. For another, it allows the family members to choose their own trustees.
Sometimes, reports the Pittsburgh Post-Gazette, there are good reasons to leave unequal amounts of money to children.
If during your lifetime you bought one child a house or paid for an education – but not for the other – the second heir could reasonably be expected to inherit more, the Post-Gazette says. If one child is financially successful but the other struggles to make ends meet, you could leave more to the less successful one.
Another time that it makes sense for parents to make unequal gifts to heirs is when a family business is involved, the Post-Gazette says.
If one child has been involved in the business and helped grow it and the family’s wealth, often the business will be left to that child. That’s sensible because the one child devoted himself to the business to make it a success.
But if the other heirs feel left out, it could lead to a lawsuit challenging the arrangement’s validity.
Happy family!
You have no idea where your children will end up financially. The successful one could lose a job and end up bankrupt. The other child might be less successful but more stable and have a fine lifestyle. In that scenario, it would be unfair to leave more to one than the other.
Perhaps your children never fight, and there won’t be a problem distributing assets. But you don’t know that for certain until the kids live through it.
To give your children the best chance of staying on good terms with each other, we encourage you to leave a financial will that allocates the assets and an ethical will that conveys guidance to them.