It is always best to start estate planning as early as possible. Although creating a will can be a stressful process, it’s still a necessary step in life that has to be done regardless of the age or circumstances you’re in.
Now as a parent, you’re probably worried about how to distribute your estate equally to your children. Of course, you would prefer to split your assets fairly to your children because after all, it is the right thing to do. However, you have to consider the circumstances that make “equal” a bit hard to make sense when families have different dynamics.
When Does Unequal Distribution Make Sense?
Sometimes, dividing your estate equally is not a good solution in all situations. You can start by identifying your estate and estimating its value. List all your real estate such as home, secondary residences plots of land, and all other properties you own. You also have to include business interests or find out whether you can business interest after death, personal property like furniture, clothing, jewelry, or intellectual property such as a novel you wrote.
Figure out which beneficiary deserves to inherit more than the others. If you have a disabled child, for example, leaving that child an amount more than your other children can make more sense.
Another example that makes unequal distributions acceptable is when adult children didn’t have the same level of financial success and earning ability, therefore, leaving more to them than to the children who are already financially stable. This situation can be a little tricky because some beneficiaries usually refute as to why they have to be penalized for being financially successful. There must be an open and proper communication between the heirs when you are creating your estate plan.
Other situations that require appropriate discussion is when beneficiaries are involved with a family business and others are not and when an inheritance includes non-liquid assets which mean liquidy and tax implications must be considered in evaluating one’s decisions. The amount of gift your heirs received might be reduced because of taxes so keep this in mind if you want to make an equal distribution of your estate. Consult your estate planning attorney about the effect of taxes on your will.
Per Stirpes vs. Per Capita
This is the simplest approach to equally distributing assets to beneficiaries. The estate is being distributed per stirpes which means each branch of the family will be given an equal share of the property. This approach becomes more significant when an heir dies before his or her parent. The heir’s share will then be passed equally to the grandchildren.
Per Capita approach, on the other hand, is the complete opposite of the above. The estate is “divided by heads” meaning, the shares are equally distributed to each heir. Although this makes sense in theory, it may also cause consequences when the heir dies before his or her testator and the grandchildren would receive the same amount as their aunts and uncles who are still alive.
Per Capita by Generation
A mixed of per stirpes and per capita, per capita by generation is an estate planning approach wherein the second generation will receive what was promised to them and the beneficiaries in the next generation would each receive a fair share of the portion that would have been given to the whole third generation, regardless of their connection to the second generation.
Why Should You Consider Estate Planning Seriously?
There will be long-term consequences on the approach you choose in giving away your money when you die. It is therefore important to openly and honestly discuss your estate plan to all stakeholders. You may also need the help of a financial advisor along with your attorney to guide you through all the crucial estate planning issues such naming guardians for minor children, specify the age at which the children can claim their inheritance, choosing an executor and other related factors.
Your family may end up fighting over your assets if you don’t set everything up appropriately. That’s not a good legacy to leave behind. If all heirs have the same understanding towards the will you prepared in advance, it is likely for resentment and bad feelings to emerge later on.
