When planning their estates, many people choose to divide their assets equally among their children—but an equal distribution may not always be the same as a fair one. Different families have different circumstances, and when it comes to providing for your grandchildren, equal division of your assets among children could result in unfairness.
Say, for instance, that John has two adult children, Frank and Jill, and that John’s estate plan dictates that his $4 million estate be divided equally between his two children.
When John passes away, Frank and Jill will each receive $2 million. But if Frank has one child and Jill has two, Frank’s child will receive $2 million from his or her grandparent’s inheritance, while Jill’s two children will each receive only $1 million (assuming that Frank and Jill each preserve their full inheritances).
Options for preserving fairness
If he wanted to ensure that his grandchildren will be treated equally, one option John could pursue would be to purchase a life insurance policy that divides the proceeds equally among his grandchildren.
John could also arrange policies on the lives of Frank and Jill which would provide equal amounts to each grandchild. This may be an attractive option since Frank and Jill are younger, meaning that the available death benefits would be greater—and John could help Frank and Jill pay the premiums using gifts or loans.
Using life insurance plans would allow John to divide his other assets equally between his children while still providing more for his grandchildren in a fair and equal way. Although Frank’s child may still receive more than Jill’s children do on a per capita basis (depending on how Frank and Jill spend their inheritances), the additional assets these life insurance policies provide will still make John’s estate plan seem more fair to his grandchildren.
Contact us today if you need assistance with properly addressing certain family members in your estate plan. We can make an assessment of your situation and offer you proper guidance.