Is there a difference between fair and equal in estate planning?

Parents of young children may strive to keep things fair between their children. For example, parents may set an age at which the child can have a later bedtime, watch certain movies or television shows or start dating. However, it is not always that easy to treat your children equally when the children grow up and become adults. This may especially be true when it comes to estate planning.

Take, for example, the family business. Some adult children may be much more involved in the family business than others. With that in mind, parents need to decide whether it is fair to leave each child equal shares in the family business. Parents may decide to grant the more involved child the business in their estate plan, and grant the less involved child other assets in their estate plan. The goal may not be dividing everything 50/50, but instead making distributions fair.

An estate planning tool that family business owners may want to consider utilizing is a “buy-sell” agreement. This is, essentially, a contract between the business owners. It can stipulate shareholder rights. This includes whether a shareholder can sell stock or who has control over the day-to-day running and decision-making with regards to the business. This may be another way to hand down the family business in a fair manner.

In the end, when parents are making an estate plan, they may want to consider the needs of their adult children. It’s not always necessary to split each asset down the middle so that each child can have an equal share. Instead, striving for fairness may be key toward avoiding family disputes about your assets after you pass on.

Source: Forbes, “Why Your Estate Plan May Divide Assets Equally, But Not Fairly,” Mark Eghrari, April 30, 2017