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Create Your Estate Plan: When Being Fair Doesn’t Mean Being Even

Dividing assets can be a stressful ordeal and, surprisingly, an even split may not make the most sense. But in all cases family meetings can help.

Presented by Allegiant Private Advisors March 7, 2019

The transfer of wealth to heirs through your estate plan communicates many things to those we leave behind. It says who is remembered, who is loved, who is important, and who we trust to be in charge. Therefore, dividing assets between your children can be a stressful ordeal. Many parents want to be fair to everyone—interpreted as an even split of all assets. For some families, however, an even split doesn’t make the most sense. How you handle this delicate situation with your own family depends on many personal factors. 

As a parent, you might be forgiven for easily discounting the option of leaving your estate to whoever you want, in whatever portions you want, even to those other than your children. You’re not required to divide your assets evenly - or even fairly. In most cases, parents certainly want to be fair to each child, but a fair distribution does not necessarily mean an equal distribution. For example, a child who has special needs may require more money in the long term. Perhaps you helped pay for advanced degrees for a child who becomes a high-earning doctor or lawyer; another child who is a teacher may think they should receive more because their education cost much less. Even though the distribution is not equal, it might still be considered fair.

Of course, no matter what you think is fair may not be seen that way by your children, which could turn into unintended but long-lasting hurt feelings. Either way, a grudge may be held for years, especially if the distribution comes as a surprise and is not explained or discussed beforehand.

In our experience of working with families at Allegiant Private Advisors, we have found that designation of tangible personal property has as much potential to cause lasting conflict as monetary assets themselves. Who gets mom’s ring or dad’s watch can be more problematic than money. Therefore, we always recommend leaving a separate list of cherished personal property with clear instructions about who gets what. Most states admit a separate personal property list called a Personal Property Memorandum as part of the Will.

Overall, there is no doubt that the single best way to avoid miscommunication or unintended consequences is to share your plans and desires with your family before they’re surprised or confused by reading through estate documents. Nothing beats the simple method of a family meeting and discussion so that you can make sure your ideas are communicated directly by you. An attorney they’ve never met before, reading your well-crafted document to your grieving family in some office conference room, will never have the same impact as words spoken directly by you. Many examples of successful family intergenerational wealth transfers cite clear, open communication between family members as a critical factor in that success. This does not mean you need to talk about actual dollar amounts and reveal your private finances to your beneficiaries, but it is a valuable moment to spend together so you can make sure they understand your intentions. The Allegiant team has facilitated many family meetings and found they can be inclusive and emotionally rewarding as well as informative.

Bottom line: it’s important to discuss your estate planning as a family if you want to make sure there are no misunderstandings or disputes. Also, if you aren’t careful with your estate plan (such as account titling and beneficiary designations), your intentions may not be made as clear as you thought, and the estate may be divided in an unequal manner despite your wishes.

Everyone’s family is unique and comes with their own challenges. We recommend first having your estate documents reviewed to make sure they say what you want, then reviewing titling and beneficiary designations to ensure the distribution of your estate is correct. If changes need to be made, discuss your goals and intentions in a clear manner with those trusted advisors helping you. Also, leaving a personal letter accompanying your legal documents may help your children better understand your wishes, rather than your family trying to learn legalese by reading your Will.

And family meetings—they matter. 

Allegiant Private Advisors is located at 240 South Pineapple Ave., Suite 200, Sarasota, FL 34236. For more information, call 941-365-3745 or visit www.allegiantpa.comAdvisory Services offered through Allegiant Private Advisors, LLC, a Registered Investment Adviser