As estate planning attorneys know, parents usually leave their assets equally to their children. However, we also know, both personally and professionally, that sometimes an equal division is definitely not fair. Sometimes children have different needs and abilities. For example, one child might be a successful physician, while another might be an award winning teacher. Both professions are valuable and have merit. However, society values those contributions disproportionately.
Another situation warranting an unequal division of assets might be where one child worked for decades on the family farm, which represented the majority of the value of the assets.
A recent article in The Wall Street Journal examined various reasons and may be found here.
There are still more reasons parents might choose to treat their children unequally. For example, one child might have cared for the parents in their declining years. Another child might have special needs. Whatever the reason, the estate planning attorney’s job is to ensure that their clients’ wishes are carried out. It is important to remember that an unequal distribution might trigger a challenge to the estate plan.
There are various ways to discourage such a challenge. First, an in terrorem, or no contest clause may be included in the Will and / or Trust. With such a clause, a challenger will take nothing. This is an especially potent device when the would-be challengers are given something, even if a smaller share. Another way to encourage children to honor the parents’ wishes is by having the parents write a side letter as to their reasons for the unequal treatment. It is better to have this as a side letter so that it is more difficult for would-be challengers to use external evidence to show that those reasons do not exist and, therefore, the distribution should be equal after all.
Facilitating a fair division of assets may be one of the most important things that we as estate planning attorneys do. What do you do to encourage the children or other beneficiaries to honor the wishes of the decedent? Do you include an in terrorem clause? Do you use a side letter? Do you use additional measures?
Stephen C. Hartnett, J.D., LL.M.
Associate Director of Education
American Academy of Estate Planning Attorneys, Inc.
9444 Balboa Avenue, Suite 300
San Diego, California 92123
Phone: (858) 453-2128