Photo of Professionals at Rebecca W. Geyer & Associates P.C.

Caring For Generations

In Estate Planning, Equality and Fairness Might Be Two Different Things

by | Sep 28, 2022 | Business Law, estate and tax planning, Estate Planning, estate planning documents

When deciding how to split your assets among your children at death, there are many different factors to consider. But fair  equal division of assets isn’t always the fairest, the American Academy of Estate Planning Attorneys explains. Examples of situations where an equal division might not prove fair:

  • One child, through a windfall, is much better off financially than the others.
  • One child served as the caretaker for the parents.
  • One child helped manage the family business or farm.
  • One child has a child with special needs.
  • One child was laid off work for an extended period of time.
  • One child has a debilitating medical condition.

If you gave more financial assistance to one person while you were alive, then you might want to leave your beneficiaries an unequal amount in order to “even things up”, Lahaina Araneta, JD suggests in wikihow.

At Geyer Law, we often encounter situations such as these, and our attorneys agree that the key to avoiding post death dispute and bitterness among heirs is to hold family meetings ahead of time, communicating the parents’ intentions and the reasoning behind them.

Receiving an inheritance does not, in itself, result in income tax becoming due. Still, when planning which child will receive which assets, tax can become a very important consideration.ZSecurities, real estate, and art – the tax basis gets updated to the fair market value on the decedents’ date of death (or six months later, if elected).

  • Retirement accounts such as IRAs and 401Ks – these assets have not yet been subject to tax, and heirs will owe tax on every withdrawal.
  • Life insurance benefits taken as a lump sum will not be taxable to the named beneficiary.

*(Geyer Law offers no tax advice. These examples are given to point to the nuances of selecting which assets are to go to which child; a seemingly equal distribution of assets among one’s children may not prove to be equal after tax.)

When it comes to inheritances, the reality is that feelings largely come into play, as well as potential assumptions, Canadian wealth management firm RBC points out, and these inconsistencies may be the source of significant issues down the road, ranging from resentment and family conflict to challenges to a will.

As estate planning attorneys in Indiana, if our clients make changes in their wills or estate plans that result in favoring one of their heirs over others, it’s up to us to determine they are competent and capable of handling their own affairs at the time they are making those changes.

Better to anticipate trouble, though, than to cope with it later. To avoid later conflicts, we aim to help clients carefully evaluate their unique circumstances – including their family dynamics – and come up with a thoughtful plan to leave everyone with pleasant thoughts and memories.

– by Cara Chittenden, Associate Attorney at Rebecca W. Geyer & Associates