Most every parent wants to treat their children fairly and equally. However, that may not mean treating them exactly the same. You know the battles that you’ve fought over this. Susie is a few years older than Kyle and Jamie. Occasionally, maybe you let Susie stay up later or let her have a few other privileges (or responsibilities) because of her age. Instantly, you hear a chorus from the others, “but, that’s not fair!”
These problems persist long beyond it’s your responsibility to enforce their bedtimes. The problems are especially difficult when there is one asset that is of greater value than the share of any one child would be. For example, let’s say you have four kids, Bill, Meg, Sally, and Ryan. You have a piece of land that’s been handed down to you from your grandfather. The land is worth $1 million and your total estate is worth $2 million. You have a few options:
- You could divide the land and give ¼ of the acreage to each child. But, some properties are not easily divisible. Also, your children may not all be interested in the property.
- You could give an undivided ¼ interest in the property to each child as tenants in common. Again, some of the children may not be interested. Also, this forces the children to work together even more than being neighbors.
- You can give all the land to one child. Perhaps Meg has always cherished the property. You could give all the property to her. But, this would result in an unequal distribution of $1 million worth of property to Meg and the remaining $1 million to be divided among Bill, Sally, and Ryan. Even though the other children didn’t want the land, they may still complain that the division was not fair.
- The solution may be to give Meg the property, but find other assets to give the other children to equalize the dispositions. The property could be given to Meg encumbered by a mortgage for $500,000. Thus, the others would each receive 1/3 of $1 million in property and 1/3 of the $500,000 note. But, sometimes this can cause friction among the siblings.
A better solution would be to have life insurance that would add liquidity to the estate. A $2 million life insurance policy would increase the estate to $4 million and each child would receive $1 million worth of assets.
So, it seems the best solution is the life insurance, which may be fairly inexpensive, especially if you get a “second-to-die” policy that pays off after you and your spouse are gone. If you own that insurance in a properly designed Irrevocable Life Insurance Trust, it would not be estate taxable.
A qualified estate planning attorney from Morris Hall, who focuses his or her practice in estate planning, can help you sort through various possible solutions to your situation. We can help guide you to an answer that helps keep your family together and keeps sibling rivalry in their childhoods, where it belongs. Request a free consultation here.