Inheritance Conversations: Dividing Assets Among Your Heirs

Apr 15, 2024Blog

Your estate plan is a private matter, and your estate is yours to divide up as you wish.  But when children don’t understand your inheritance intentions, it can result in arguments and legal battles among siblings and other heirs after you’re gone. They may not see eye-to-eye on family circumstances or the choices you made that affect their future. Relationships can change and intensify as underlying issues bubble to the surface, creating tensions over your estate and possibly tearing your family apart.

While inheritance conversations can be uncomfortable, not talking to your adult children and other descendants about your plans may come at a cost. Even close siblings may struggle to maintain happy family relationships when a parent’s decisions are misunderstood.  A disinherited child might accuse a sibling or stepparent of influencing your decision. These misunderstandings can lead to costly lawsuits, and emotional and financial misery for those you leave behind.

The solution is to have mature inheritance conversations with your heirs, sharing details of your estate plan and the reasoning behind particularly difficult decisions. Do what you can to manage expectations for adult children as they forge their financial plans. Knowing their general inheritance situation can change their decision-making process and lead to better outcomes.

Is Equitable Distribution Always Appropriate?

When you are making decisions about how to leave property to your children, the clearest choice is often to divide everything into equal shares. This may prove pretty straightforward when all your children are doing equally well.

But what if your son is a starving artist with mouths to feed, and your childless daughter has made millions on Wall Street? At first glance, you may feel it makes sense to leave more to him than to her. But that decision can have unintended negative consequences—your daughter may feel hurt and less loved, although just the opposite might be true.

Appearing to favor one child over another often fans the flames of sibling rivalry. You don’t want to leave behind an environment full of disappointment or resentment. That’s why you want your estate planning to consider the long term, rather than just your current family circumstances.

Even if your daughter has no children now, she may have them in the future. Your son’s career or his spouse’s career could take off, so that he no longer needs the extra financial support you were willing to give. Perhaps your son and his spouse are not skilled at managing money and will waste the inheritance, while your prudent daughter will invest wisely and provide a legacy for her nieces and nephews, if not her own children. Regarding the latter, it might be a wise decision to leave an inheritance for your grandchildren.

These days, anyone’s family or financial situation can take a sudden turn. Consider the following:

  • Illness, injury or natural disaster can strike, causing financial misfortune.
  • Marriage often doubles income and property, but divorce tears assets apart.
  • Investment decisions might succeed or fail.
  • Assets can grow or diminish.
  • The economy may cause credit to dry up or make cash plentiful.

Estate Plans Can Change

When you begin shaping your estate plan, you may consider a strategy that splits your assets equally. Then, as time passes and your children’s lives evolve, you can revisit your will or trust and adjust it as often as you like.

There may even be a way to address specific financial scenarios and concerns in your estate planning documents that would trigger leaving more to one child than another, but only if something particular happens. Your estate planning attorney can discuss different situations and how you might prepare for them.

Discuss Your Wishes Openly

Even if your children get along well, the distribution of your assets can require conflict resolution skills. The easiest way to avoid a fight is to speak to your children directly. Inheritance conversations help you manage their expectations about your estate plan and listen to their views. Unless you ask, you cannot know for sure what they might want to hold onto once you’re gone. The best course to avoid future dissent is to include all your loved ones in these family discussions because if one gets a say about what they inherit, so should all.

These conversations can also be difficult because an equal division is not always possible depending on the asset. Passing on real estate equally to children can be particularly vexing.  It is often the child who can least afford to keep the property who is opposed to selling, and the financially able child or children who have no interest in it end up paying to maintain it for that sibling.

If you still want to leave your son more than your daughter, sit down with both children and explain why you’re making this decision. Even if your daughter might be unhappy to hear it, at least she would have less reason to blame your son later.

Having this conversation also gives your daughter the chance to freely agree, letting everybody walk away happy. More well-off heirs might appreciate receiving more sentimental items or family collections rather than cash. In contrast, the less well-off heirs can genuinely benefit from additional monies.

The Conversation

Talking to your children about their inheritance is an integral part of estate planning. Being transparent, fair and open to their emotions can help ensure a smooth transition of your assets to the next generation.

Keep a few things in mind during inheritance conversations:

Timing is Important

Have these conversations when children are mature enough to understand the implications of inheritance. Don’t create unnecessary anxiety or confusion by starting the conversation too early.

Numbers May Change

Be clear about your estate intentions and plans without getting too detailed about the numbers. Being open about your goals and hopes for them can help avoid future conflicts. Not providing exact numbers keeps your estate planning flexible.

Consider Fairness

Consider what is fair and equitable when dividing your assets among children. Each child does not necessarily need to have an equal amount. Consider factors such as their current financial situations, their relationships with you and potential future financial needs.

Address Emotions

Inheritance can be an emotional topic for everyone. Acknowledge and address any feelings of anxiety, guilt or resentment that may arise during the conversations.

In the end, you may be planning for unequal distributions of your estate and don’t wish to discuss this with your heirs. If this is the case, you might consider including detailed language in your estate plan regarding how you came to your decisions. This can help your heirs better understand your goals and minimize potential conflict among them, but proceed very carefully as this could have the opposite effect if your reasoning is based on an incorrect assumption.

Work With an Estate Planning Attorney

Consult with an estate planning attorney to ensure you are tailoring your legacy plan to meet your needs. You want your plan to be unique to your circumstances and family dynamics. That’s why it’s important to avoid online legal forms created as basic templates. An estate planning attorney can customize documents to suit your wishes and goals, and communicate with your family about why being fair is not always the same as being equal.

Professional advice helps you think through issues and possibilities you may never have considered. Experienced estate planning attorneys can also prepare you for challenges that may not have happened yet. With their guidance, you can minimize disputes, confusion, frustration and grief during emergencies and after you pass.

Even if your family is not prone to conflict, managing heirs’ expectations and putting together a sound, routinely reviewed estate plan can prevent a bitter legal battle that can tear your family apart.