Most parents would say without hesitation that they love each and every one of their children equally. For many Kent parents, it will make sense to treat each child equally when it comes to estate planning. In terms of the best use of a future inheritance, though, not all family relationships are created equal. For any one of a number of reasons, it may make sense to treat children differently in a parent's will.
Differences in children's earning capacities, for example, may be one reason to consider making different provisions for inheritance. A parent's will can address children's actual financial needs. An explanation of the decision can help make sure that no child's feelings are hurt by a smaller gift.
On a similar note, one child may have a history of trouble managing money. In that situation, it may be appropriate to consider a gift to the child in trust. Spendthrift trusts and other specialized trust instruments can prevent waste by imposing limitations and conditions upon a child's use and receipt of inheritance funds.
Where one child may be unskilled in matters of money, another may be unlucky in love. A gift in trust can help shield a child's inheritance from legal claims by future spouses and exes.
A specialized trust will often be the best idea for a child with a disability or a chronic disease. Special needs trusts can be structured to help provide for a child's personal needs without jeopardizing eligibility for critical medical assistance programs.
Unequal inheritances may also be a fair way to balance out unequal loans or gifts among children. Accounting for financial help offered during a parent's lifetime can help avoid hard feelings among siblings in the future.
Finally, children and parents sometimes become estranged from one another for a variety of personal reasons. The law imposes no requirement upon parents to leave an inheritance to a child who has separated from the family. However, parents' reasons for disinheriting a child should be memorialized in the will.
In short, a simple and effective estate plan does not necessarily require equal gifts among children.
Source: InvestingAnswers, "7 Reasons Your Kids Shouldn't Always Get The Same Inheritance," Liza Hanks, Oct. 26, 2012