While most parents have the inclination to treat all their children equally
when it comes to an inheritance, this is not always the wise choice. Here
are some scenarios when an unequal distribution may be better:
Children of unequal wealth - If you have one child that is a successful entrepreneur and another that
is a social worker, you might want to leave more to the less financially
advantaged child. If that's the case, be sure to either explain it
to them beforehand or write a letter to be opened upon your death explaining
your reasoning. Most children equate money with love, so don't leave
hard feelings behind.
Poor money manager - if you have a child who is poor at managing money and always in debt,
you have an alternative to leaving an inheritance outright: a spendthrift
trust. Setting up a trust to disburse certain amounts at predetermined
ages, or allocating funds for medical or educational expenses, can protect
the inheritance throughout your child's lifetime. In this case, it
is best to name a trustee who is not a family member.
Bad relationships - if you have a child who has one or more divorces or a string of bad relationships,
you should probably consider establishing a trust in this case as well
to shield assets from divorce.
Special needs child - a child with special needs should be provided for through a special needs
trust, which can be established in a way that protects his or her ability
to receive necessary governmental assistance.
Child with long-term care needs - if you have a child who has a chronic illness and needs expensive medical
treatment, you might want to consider purchasing additional life insurance
naming that child as beneficiary. If the child is a minor, you will need
to set up a trust as beneficiary of the policy.
Pre-existing loans - if you have made substantial loans to one child and not the others, you
may wish to count those as an early inheritance and take them into account
before estate assets are distributed.
- in some cases, parents want to disinherit a child. If you do decide
to take this path, you need to be clear that you are intentionally disinheriting
the child and not just simply leave them out of your estate plan.