In the estate planning discussions I have with my clients the concept of being fair with distributions made to children often comes up. It’s not surprising because parents most often really do want to be fair with their children. However, I have come to learn that parents who attempt to be fair in the distribution of their estate through their Idaho estate planning often cause more problems than they solve. Here are 3 reasons why your estate planning does not need to be fair to your children.
1. THE LAW DOES NOT REQUIRE FAIRNESS
The first reason why your estate planning does not need to be fair to your children is that there is no law in Idaho, or in any other state, that requires fairness. Some people point to the laws of intestacy saying that because these require equal distribution to all children that the law requires fairness. However, as you will see in reasons 2 and 3 below, the laws of intestacy do not automatically create fairness of the distribution of your estate.
Because there is no law that requires fairness, you are free to do whatever it is that you choose to do with your estate. In other words, you are free to decide what distributions are made to individuals whether they are your children or not. You are also entitled to skip your children completely if you choose and give your estate to others including grandchildren, charities, or any other person or institution that you feel is deserving of your estate property. For some parents, just knowing that the estate planning they create is their own, and that they are not forced to make distributions to any particular person, is freeing and gives them the ability to make good estate planning decisions.
2. YOUR ESTATE IS BASED ON YOUR CIRCUMSTANCES
The second reason why your estate planning does not need to be fair to your children is because it is truly based on your own circumstances. For some reason, many parents feel an obligation to leave an inheritance for their children. There is no law that requires this. If the circumstances of your estate are that you need the money to care for yourself before you die, and/or to take care of your own debts after you have passed, then there is no need for you to leave anything for your children.
When creating an estate plan the very first place to start is with your own personal circumstances and your own needs. Based upon your circumstances and needs, you then have the ability to make some decisions about distributions that will be made from your estate to others.
3. YOUR CHILDREN’S CIRCUMSTANCES ARE NOT EQUAL
The third reason why your estate planning does not need to be fair to your children is because your children’s circumstances are not equal. Let’s use an example to illustrate this concept. Suppose you have 3 children that are aged five years apart. Now let’s assume that your oldest child is finished with college that you paid for and that it cost $100,000. This child has taken the degree that you help them yet and is now working and earning a living for themselves. Your second child is halfway into his college education and you have paid $50,000 towards it. Your third child is still in high school and won’t be entering college for a few more years.
Now let’s assume that you pass away and that your will divides your state equally among your 3 children. In this instance your distribution is not fair because the circumstances of your children are not equal. You have already paid $100,000 towards your oldest child’s education, $50,000 towards your middle child’s college education, and nothing towards your youngest child’s college education.
Let’s say that your estate had $900,000 in it after paying all debts and that $300,000 was given to each of your 3 children. In this instance your oldest child really actually received $400,000 from you because of the college education you paid for while you were alive. Your middle child actually received $350,000 for the same reason. Your youngest child now is only receiving $300,000. Additionally, your youngest child has to use a portion of the money you left him to pay for his own college education. Alternatively, your oldest child can take the $300,000 and use it exclusively for his own benefit for any reason he chooses.
This is just one example of how the circumstances of your children’s lives make distribution through your estate more difficult than simply providing an equal distribution. If you truly want fairness for each of your children you need to think more thoroughly about your estate planning and how the distributions are being made.
If you have questions about making distributions in your estate planning to your children, or any questions about your estate planning, we can help. Call us toll free at 877-232-6101 or 208-232-6101 for a free consultation with Lane Erickson and the Racine Olson team of Estate Planning attorneys in Idaho. You can also email Lane Erickson directly at firstname.lastname@example.org. We will answer your Idaho Estate Planning questions and will help you solve your Idaho Estate Planning problems.