Providing Children with an Unequal Inheritance

When it comes to estate planning with wills and trusts, fair does not always mean equal. Sometimes parents have good reasons for wanting to providing their children with an unequal inheritance due to the different needs each child, or due to differences in the quality of the relationship.


Ladders.com’s recent article, “More parents are leaving unequal inheritances to their adult kids” suggests that a growing number of parents do not feel they need to provide for their children equally.


According to a new study from Merrill Lynch Bank of America/Age Wave, responding parents with more than one child who are planning to leave an inheritance are okay leaving different sums to each child, based on the situation. In fact, the research showed that 67% of Americans think that under certain circumstances, an unequal inheritance is just fine.

Other studies have showed the same trend. A 2015 study by IZA Institute for Labor Economics, based on data from a large government study, found that among Americans at least 50 years old who had a will, the percentage who left unequal inheritances to their children had more than doubled from 16% in 1995 to 35% in 2010. However, an unequal division can generate ugly sibling fights, jealousy and meltdowns.


An Ameriprise survey found that among siblings who fought about money as adults, 70% of the fights involved issues with parents, like how the inheritance gets divided. If you go with unequal inheritances, you need to manage expectations so you don’t have one sibling blaming another, or you.


There are many reasons why parents consider leaving an unequal inheritance. In the Merrill Lynch Bank of America/Age Wave study, nearly one in four of respondents said a child who has children of her own deserves more money than a child who doesn’t have kids. About 66% said that a child who steps in as primary caregiver for an aging parent deserves to inherit more than other siblings. A total of 40% of participants with blended families say they should treat stepchildren the same as biological or adopted children.


Because of the potential different circumstances of each child, you may want to give one child the money outright, and with the other, you may want to put it in an inheritance trust. The reason for doing so is to protect the child, not to punish them. If a child struggles with addiction or overspending, or is in a high liability profession where lawsuits are a foreseeable risk, a trust makes certain that he or she has access to the money, but the trustee has control over its disbursement and can keep would be creditors at bay. In some cases, parents may also be concerned that a child’s marriage may be in trouble or feel uneasy about their son or daughter-in-law.


If you feel you have a sound rationale for providing your children with an unequal inheritance, consider telling your children what you’re doing and why. Explaining your reasoning can be very important to help avoid misunderstandings and inaccurate perceptions.


Moreover, if you think an inheritance trust is best for one child, you may choose to use a trust for all of them to avoid hurt feelings and anger among the siblings after you’re gone. My opinion is that providing an inheritance in an inheritance trust (as opposed to an outright gift in the child’s name) is rarely a poor decision, particularly if it’s drafted with advanced provisions that provide needed flexibility for changed circumstances over time.


Reference: Ladders.com (March 25, 2019) “More parents are leaving unequal inheritances to their adult kids”


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