While it may be true that money can’t buy happiness, it’s also true that money can buy a lot of unhappiness.
Never is that truer than with last wishes expressed in a will or trust.
With my now nearly 40 years of practice, I can tell you that certain actions people take in their wills or trusts will likely cause unhappiness among heirs and beneficiaries, no matter how much money they are receiving.
Distributions based on perceived needs
Parents are often torn about leaving shares of an estate equally to children when one or more child is more well off financially than the other(s). I hear comments that the more financially stable child doesn’t “need it” or, the inverse, discussions about how much more the other child “needs it”—the “it” of course being money. Usually, the parents have some understanding, however deep down, that a trust that leaves 70% to one child and 30% to the other, for example, doesn’t “look right.”
I encourage the clients to look deeper. Why does one child have more need than the others? Is it from circumstances beyond their control, like a disability that prevents them from working, an accident, health issues, or a natural disaster that destroyed their home? Perhaps they have a special needs child? Or is it simply because they chose a different, lower-paying career, or chose to have several children that they send to private schools? Is it because they can’t hold a job, have been divorced, or have a drug or alcohol problem?
If it’s the former, it may seem perfectly fair to all of your children that the child with more need receives more of your assets. If it’s the latter, it’s likely the other children will consider your gift of more assets to the needy child to be a reward for that child’s choices or bad behavior and a punishment for the other children—whether you mean that or not. It’s not the money. It’s about the message being sent—what behavior is being “rewarded” and what behavior is being “punished” or simply overlooked.
Even if it were strictly about the money, let’s talk about the perception of need. Are you certain your child whom you view as well off really is? Are they so catastrophe-proof that you’re certain they would never need an inheritance from you? Are you assuming that the “wealthy spouse” your child married really will take care of your child? Is your child’s spouse wealthy or was it really their parents? Keep in mind, inherited assets are separate property, so your child’s spouse may be wealthy, but they may also be able to keep all assets away from your child.
Even when a child is well off, or agrees their sibling needs more help, a disproportionate distribution of assets, especially when it comes as a surprise, can cause unhappiness and affect the siblings’ relationship in the future.
There can, of course, be good reasons for unequal distributions, but carefully consider what message you are sending when doing so. Where possible, it’s a good idea to discuss your plans with your beneficiaries and make sure everyone is comfortable with them. I’ve seen too many estate plans cause permanent rifts among siblings because of a perceived unfairness.
The favored child
Another area where I see strife between siblings when a parent dies, is the parent’s choice of executor and trustee. Trustee is a tough job. It’s not a “reward,” it’s work.
Nonetheless, the child(ren) not selected to serve often feel mom or dad picked their “favorite” child rather than the most capable, or simply chose the oldest child because that’s traditional.
Again, if you’re choosing one child over others, which is sometimes necessary, communication can be key. Let your family know who you’ve chosen and why. If your children can’t agree, consider a private fiduciary or corporate trustee. It’s more expensive, but this may be a time when spending that money can buy happiness for siblings, or at least preserve their relationship.
The child who cared for parents
Another common scenario resulting in sibling strife is when one child moves in with a parent to “take care of them” when the parent ages. The parent then amends or creates their trust to leave the house to the caretaker child because, after all, that’s where the caretaker child has been living, or because they’ve “earned it.”
The caretaker child may then inherit the largest asset of parent’s estate, especially if cash funds are depleted for the parents’ care. This could be fair, especially if the child was a caretaker for an extensive period, perhaps had to quit their regular job, or sold their own home and/or moved a great distance.
It’s important to consider context: did the caretaker child move in because it saved them money or they had nowhere else to live? Were they actually caretaking or just sharing a house? Were they being compensated for being a caretaker already? If any of those scenarios are true, perhaps the caretaker child didn’t truly “earn” a bigger share of the estate. But again, a conversation with the children can flush out concerns and perhaps some misperceptions.
Money isn’t really what’s causing the unhappiness—the root of an heir’s unhappiness is usually the feeling that they were not treated fairly.
This is where communication can be important. Equal is not always fair, and fair is not always equal. But if you’re hesitant to even discuss an unequal distribution among your children or grandchildren, you probably already have an idea that it’s not fair, or at least it won’t be viewed as fair. Is that what you want your last wishes to convey?
Teresa J. Rhyne is an attorney practicing estate planning and trust administration in Riverside and Paso Robles, CA. She is also the #1 New York Times bestselling author of “The Dog Lived (and So Will I).” You can reach her at Teresa@trlawgroup.net