Creating a will that is fair to beneficiaries doesn’t always mean dividing your estate in equal shares. You want be fair. But there’s a lot of room for interpretation.
“I tell my clients that ‘fair’ doesn’t always mean ‘equal,’ ” said Wade Chessman, president of Chessman Wealth Strategies in Dallas. “I recommend that they love their children equally but treat them uniquely.”
Parents often struggle when deciding whether to leave one child more than another, or how much to leave members of an extended family, said Michael Wald, estate planning lawyer at Underwood Perkins PC in Dallas.
“For some reason, we have a cultural notion that equal is the same as fair,” he said. “This is the notion so much so that often an unequal distribution is considered unnatural, and unnatural distributions raised the chance of a will contest by magnitudes.”
Experts advise that you consider the needs of each beneficiary.
“Sometimes one child is well-off and doesn’t need the inheritance. Sometimes only one child has not yet been through college,” Wald said.
A child may also have special needs, leading you to leave more to that person.
“In many situations, treating each child according to his or her needs is more fair and more closely duplicates what a parent would do if still alive,” Wald said.
You’re not required to distribute your assets “quantitatively” equally among your children, said Norm Lofgren, estate planning attorney at Looper Reed & McGraw PC in Dallas.
“Assume for a moment that Mom and Dad have two children,” he said. “Both have college degrees. One is a financially successful businessman earning several hundred thousand dollars each year, and the other is by choice a minister earning less than $50,000 each year.
“If Mom and Dad decided to just divide their modest estate equally between their two children, have they done the fair thing? There is no perfect answer.”
The issue of fairness in a will also surfaces with blended families in which there are children from previous marriages.
“Often a spouse wants to make sure her current husband is provided for, but upon his death, wants to benefit her children, not her stepchildren, to keep the money in the family,” Wald said. “There are specific trust techniques that lawyers use on a regular basis to accomplish this. They add a certain level of complexity to the will and make the will something that a person should not attempt to do without legal assistance.”
One person’s ‘fair’
For Cindy Bittner, being fair means including her stepdaughter and her two stepgrandchildren in her will, along with her biological children.
“They are family to me — very much so,” said Bittner, a Dallas resident who has been widowed since 1994. “They’re very much a part of my life, and I’m very much a part of theirs.”
Bittner, 59, also has biological children, a daughter and two sons.
Her stepdaughter, who lives in Tacoma, Wash., was in the original will that Bittner and her husband drew up before he died.
“Since my husband’s death, they have become part of my family, more so than prior,” Bittner said. “I knew legally I wasn’t obligated to include them, but I just feel like they’re family, so I wanted to continue with that.”
Appointing a trustee
Experts advise appointing a trustee that you can rely on to make the right decisions, within your guidelines.
“One way to handle this is to appoint a trustee to oversee a pot of money for the children and to give the trustee broad discretion,” Wald said. “Then, give the trustee as much specific instructions as to how you would handle the money yourself. This is sometimes criticized as controlling from the grave.”
Naming one child as a trustee might cause friction. Instead, many experts say to name someone who is not a beneficiary.
“If the child needs a trust, consider naming a corporate trustee and giving the child the power, the ability, to select a different corporate trustee,” Lofgren said.
Most important, communicate your wishes well — to your family and to your lawyer.
“If parents determine that they wish to divide their estate among their children in other than a numerically equal way, they need to discuss their reasons with the attorney preparing the will or trust,” Lofgren said. “Anytime Mom and Dad treat the children differently, you run the risk of creating friction and challenges to the will.”
And don’t catch your beneficiaries off guard.
“Whatever approach is used, when there is an unequal distribution, the beneficiaries should be told in advance that you are doing this,” Wald said.
To guard against one beneficiary contesting the will, include contingencies. For example, a bequest to a child may be contingent on not contesting the will.
“Consider having a family meeting with adult children to discuss the estate plan while Mom and Dad are still alive,” Lofgren said. “Springing a disproportionate plan on the children right after the funeral, when they are dealing with grief and when emotions are frayed, is not a good time.”
Whatever you decide, the solutions require thoughtful analysis. Anything less than that and you risk leaving your family fractured, and that’s not the kind of legacy you want.