Equal Inheritance for Children

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Duffalo714
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Equal Inheritance for Children

Post by Duffalo714 » Thu Nov 14, 2019 2:49 pm

How to calculate equal inheritance for children? Does anyone know a calculation for the following? I have two children, Child A and Child B. I want to give them the same monetary inheritance. I want to give Child A, who needs the money now, $15,000 a year, an advance on her inheritance, beginning in 2020 for 23 years, my life expectancy. This totals $345,000. Child B is fine financially, plus I can’t afford to give each child $15,000 a year. In my estate plan, I want to make sure both children receive the same total monetary inheritance. Can I place a fair comparative value on the $345,000 given to Child A during a 23-year period? And, therefore, subtract that amount from Child A’s future inheritance, thus ensuring that both children receive roughly the same monetary inheritance?

aristotelian
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Re: Equal Inheritance for Children

Post by aristotelian » Thu Nov 14, 2019 2:52 pm

I am not a lawyer, but I would think you could say something to the effect of "50% for each child. Each child's share includes funds already received." Then attach a letter of instruction that you update each year with the total gifts you have given to each child.

Alternatively, put $15K per year in a separate account that you make TOD to the child that isn't getting the advance gifts.

Actually that might be better since really you want investment accounts to be TOD rather than going through probate. Make them 50% beneficiaries of your main account, with a "deferred gift" account TOD to child B.

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Stinky
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Re: Equal Inheritance for Children

Post by Stinky » Thu Nov 14, 2019 3:04 pm

aristotelian wrote:
Thu Nov 14, 2019 2:52 pm
I am not a lawyer, but I would think you could say something to the effect of "50% for each child. Each child's share includes funds already received." Then attach a letter of instruction that you update each year with the total gifts you have given to each child.

Alternatively, put $15K per year in a separate account that you make TOD to the child that isn't getting the advance gifts.

Actually that might be better since really you want investment accounts to be TOD rather than going through probate. Make them 50% beneficiaries of your main account, with a "deferred gift" account TOD to child B.
This seems to be a fine idea, presuming that OP has the funds to place into the account for Child B.

Something else for OP to consider is that it’s highly unlikely that he will live exactly 23 years. While that may be “life expectancy”, OP could survive anywhere between 1 day and 40(?) years. That’s why it’s not possible to calculate a present value that will treat the two children equally.
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averagedude
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Re: Equal Inheritance for Children

Post by averagedude » Thu Nov 14, 2019 3:07 pm

Why not give $7500 a year to both child A and child B?This would help child A now, and it would be equally fair to both.

Olemiss540
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Re: Equal Inheritance for Children

Post by Olemiss540 » Thu Nov 14, 2019 3:09 pm

If you "cant afford" to give both children 15k per year, how are you sure there will be sufficient money left upon your demise to ensure this equality you seek?

I would give both children 7.5k per year each if I couldn't afford to give them both 15k per year each. Money is a nasty thing when it comes to its ability to cause division. Equality in everything once they are adults or you WILL cause some form of resentment. Obviously there may be extenuating circumstances that change these above (health issues, etc).
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123
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Re: Equal Inheritance for Children

Post by 123 » Thu Nov 14, 2019 3:15 pm

Using an online calculator with an interest rate of 2%: If today you were to invest $15,000.00 at a rate of 2.00%, you would have $432,674.45 at the end of 23 time periods (years). In this example the 2nd child would have to receive $432,674.45 to be even.

If interest rates were 5% the result is higher: If today you were to invest $15,000.00 at a rate of 5.00%, you would have $621,457.13 at the end of 23 time periods (years). In this example the 2nd child would have to receive $621,457.13 to be even.

These two example use conservative interest rates, like those for a CD. The examples show the compounding impact of regular investments. The 2nd child is losing the advantage of that compounding so accordingly the compensating amount is significantly higher than if the money was just put under a mattress.

Calculator: https://www.investopedia.com/calculator/annuityfv.aspx
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ohai
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Re: Equal Inheritance for Children

Post by ohai » Thu Nov 14, 2019 3:21 pm

averagedude wrote:
Thu Nov 14, 2019 3:07 pm
Why not give $7500 a year to both child A and child B?This would help child A now, and it would be equally fair to both.
This is what I would do, or something in between $7500 and $15k. It is the only way to ensure fairness.

For example, what if you lose money in the future and are unable to pay Child B the present value of the $15k payments to Child A? What if you outlive your life expectation? What interest rate would you assume in the $15k payments in calculating future value, and how would you hedge against change in interest rates?

RAchip
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Re: Equal Inheritance for Children

Post by RAchip » Thu Nov 14, 2019 3:27 pm

123 wrote:
Thu Nov 14, 2019 3:15 pm
Using an online calculator with an interest rate of 2%: If today you were to invest $15,000.00 at a rate of 2.00%, you would have $432,674.45 at the end of 23 time periods (years). In this example the 2nd child would have to receive $432,674.45 to be even.

If interest rates were 5% the result is higher: If today you were to invest $15,000.00 at a rate of 5.00%, you would have $621,457.13 at the end of 23 time periods (years). In this example the 2nd child would have to receive $621,457.13 to be even.

These two example use conservative interest rates, like those for a CD. The examples show the compounding impact of regular investments. The 2nd child is losing the advantage of that compounding so accordingly the compensating amount is significantly higher than if the money was just put under a mattress.

Calculator: https://www.investopedia.com/calculator/annuityfv.aspx
The $15,000 annual annuity is deceptively valuable.
Last edited by RAchip on Thu Nov 14, 2019 3:33 pm, edited 1 time in total.

Broken Man 1999
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Re: Equal Inheritance for Children

Post by Broken Man 1999 » Thu Nov 14, 2019 3:38 pm

averagedude wrote:
Thu Nov 14, 2019 3:07 pm
Why not give $7500 a year to both child A and child B? This would help child A now, and it would be equally fair to both.
Yes, this idea is very fair.

OP, in your plan, suppose the market crashes, and you are unable to "square up" the two children's amounts received. Why risk that possibility, it could lead to strife between the two, an unfortunate thing that is easily avoided.

Figuring an "equal" inheritance, with different starting points, different implied rates to attempt to make equal, a market that is going up/down, a wickedly hard thing to do, since future predictions are simply WAGs for the most part. Not to mention, did I mention market volatility?

Start the $$$ flow the same time, give equally, and done. And, more important than anything, you will have been fair.

Now, so far as one child needing help now: Why? Was it because of making poor choices, health issues, abusive relationships, disabilities, aptitude, initiative, etc. Could you share WHY the one needs help? Some reasons could cause different ideas/thoughts from me, at least, probably others as well.

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delamer
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Re: Equal Inheritance for Children

Post by delamer » Thu Nov 14, 2019 3:41 pm

It’s a can of worms.

If you have a compelling reason to give Child A money now, then discuss it with Child B. Let Child B weigh in, because surely you weren’t going to hide this payment from Child B, right?

And because it is highly likely that whatever plan you have to compensate Child B is going to backfire. As someone noted above, if you can’t afford to give Child B the money now, why do you think it will be available for Child B upon your death?

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prudent
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Re: Equal Inheritance for Children

Post by prudent » Thu Nov 14, 2019 3:46 pm

It's a given that there is no right solution because of not knowing your life expectancy, potential rate of return, your ability to guarantee making things even at death - especially that you're trying to project what would make things "even" potentially 23 years out.

What if your will said for each year after 2023 that Child A received $15,000, Child B receives $18,000 from the estate off the top before the remainder is divided equally. Let's forget about trying to predict the "right" added amount, or burdening the executor with some convoluted math. This method acknowledges the desire to square things up, and sweetens the deal for Child B for having to wait plus potentially not even get what's due if the estate isn't large enough. And if Child B recognizes that Child A needs it more now, Child B might be perfectly OK no matter how it eventually ends up, if Child B can see you tried to balance things.

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Re: Equal Inheritance for Children

Post by Watty » Thu Nov 14, 2019 3:53 pm

Olemiss540 wrote:
Thu Nov 14, 2019 3:09 pm
If you "cant afford" to give both children 15k per year, how are you sure there will be sufficient money left upon your demise to ensure this equality you seek?
Or even support yourself if you live exceptionally long.

There is a 50% chance that you will live longer than your life expectancy so I would not use that figure in your calculations.

It may not be likely but you could end up in a situation where you get poor investing returns because of high inflation or a prolonged bear market and also spend 10+ years in an expensive Alzheimers nursing home.

It would not take much imagination to come up with a scenario where Child B not only does not get any inheritance but they also have to pay for your nursing home since you outlived your funds.

There are lots of situations where it might be reasonable to leave your kids unequal amounts after you die so that is not so much the problem, it is that you might not really have enough to give away $15K a year

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Re: Equal Inheritance for Children

Post by Gnirk » Thu Nov 14, 2019 5:43 pm

delamer wrote:
Thu Nov 14, 2019 3:41 pm
It’s a can of worms.

If you have a compelling reason to give Child A money now, then discuss it with Child B. Let Child B weigh in, because surely you weren’t going to hide this payment from Child B, right?

And because it is highly likely that whatever plan you have to compensate Child B is going to backfire. As someone noted above, if you can’t afford to give Child B the money now, why do you think it will be available for Child B upon your death?
This. Discuss this with Child B.
I have two single daughters: oldest daughter has a great career and a stable life. Her younger sister had a great career and a stable life until her first "bi-polar 1 with psychosis" episode/diagnosis at age 40. Since then it's been impossible for her to keep a job for more than 4-6 months, even though she faithfully takes her medications. Right now she is unemployed with no unemployment insurance, so I am gifting her $15,000 per year, as is her father. She is very grateful for our help, and tries to earn money whenever she can. Her older sister is on board with this, and in fact is contributing $500 per month to her sister. Older daughter understands that I can't afford to gift her $15,000 per year as well at the moment, and she is fine with that.

Until now I have always treated both my children fairly and equally. But sometimes things happen to drastically change a life.

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Re: Equal Inheritance for Children

Post by dcdowden » Thu Nov 14, 2019 6:03 pm

I strongly support the advice to include the second child in the conversations about how best to support the first child with her current needs while also trying to be fair to both children. As others have already mentioned, you need to make sure that you are provided for first in your old age. Situations can and do change - sometimes for the better or worse, so you can't really lock anything in stone.

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Re: Equal Inheritance for Children

Post by aristotelian » Thu Nov 14, 2019 6:04 pm

prudent wrote:
Thu Nov 14, 2019 3:46 pm
It's a given that there is no right solution because of not knowing your life expectancy, potential rate of return, your ability to guarantee making things even at death - especially that you're trying to project what would make things "even" potentially 23 years out.

What if your will said for each year after 2023 that Child A received $15,000, Child B receives $18,000 from the estate off the top before the remainder is divided equally. Let's forget about trying to predict the "right" added amount, or burdening the executor with some convoluted math. This method acknowledges the desire to square things up, and sweetens the deal for Child B for having to wait plus potentially not even get what's due if the estate isn't large enough. And if Child B recognizes that Child A needs it more now, Child B might be perfectly OK no matter how it eventually ends up, if Child B can see you tried to balance things.
I dont think this should be decided in the will at all since it will be easiest for all involved if investment assets are TOD. If he wants to make sure the kids are given equal amounts, he should do some kind of accounting scheme so that the right amount goes to each kid.

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Re: Equal Inheritance for Children

Post by unclescrooge » Thu Nov 14, 2019 6:39 pm

aristotelian wrote:
Thu Nov 14, 2019 2:52 pm

Alternatively, put $15K per year in a separate account that you make TOD to the child that isn't getting the advance gifts.
I would go a step further.

I would separate all account types into 2.
Each type of account has a separate beneficiary. Only use the account earmarked for that child when making annual gifts.

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Re: Equal Inheritance for Children

Post by 123 » Thu Nov 14, 2019 6:47 pm

Olemiss540 wrote:
Thu Nov 14, 2019 3:09 pm
If you "cant afford" to give both children 15k per year, how are you sure there will be sufficient money left upon your demise to ensure this equality you seek?...
The OP may have substantial non-liquid assets, like the house/property/mansion/estate/farm that he/she lives in. Upon the OP's passing it is likely the assets of the estate will be sold/liquidated and proceeds distributed.
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Re: Equal Inheritance for Children

Post by Olemiss540 » Thu Nov 14, 2019 7:17 pm

123 wrote:
Thu Nov 14, 2019 6:47 pm
Olemiss540 wrote:
Thu Nov 14, 2019 3:09 pm
If you "cant afford" to give both children 15k per year, how are you sure there will be sufficient money left upon your demise to ensure this equality you seek?...
The OP may have substantial non-liquid assets, like the house/property/mansion/estate/farm that he/she lives in. Upon the OP's passing it is likely the assets of the estate will be sold/liquidated and proceeds distributed.
Maybe.

Which would be why I posed the question to the OP in the second part of the sentence.
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Re: Equal Inheritance for Children

Post by CAsage » Thu Nov 14, 2019 7:40 pm

Of course the problem is that $15k this year is worth a bit more next year, and the year after etc. So, seriously, to be fair you need to calculate what a a stream of income would be with that annual payment (and are you going to change it? Is it really forever?). Maybe create a table that says how much Child B gets depending on what year you die. Fun. But $15k now is worth a heck of a lot more than it will be in 20 years.
If you do create such a table, you could just let your executor give Child B that amount before you split anything that might be left, or set up a separate account to give Child B. Bit fuzzy.
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Re: Equal Inheritance for Children

Post by Dottie57 » Thu Nov 14, 2019 7:51 pm

Gnirk wrote:
Thu Nov 14, 2019 5:43 pm
delamer wrote:
Thu Nov 14, 2019 3:41 pm
It’s a can of worms.

If you have a compelling reason to give Child A money now, then discuss it with Child B. Let Child B weigh in, because surely you weren’t going to hide this payment from Child B, right?

And because it is highly likely that whatever plan you have to compensate Child B is going to backfire. As someone noted above, if you can’t afford to give Child B the money now, why do you think it will be available for Child B upon your death?
This. Discuss this with Child B.
I have two single daughters: oldest daughter has a great career and a stable life. Her younger sister had a great career and a stable life until her first "bi-polar 1 with psychosis" episode/diagnosis at age 40. Since then it's been impossible for her to keep a job for more than 4-6 months, even though she faithfully takes her medications. Right now she is unemployed with no unemployment insurance, so I am gifting her $15,000 per year, as is her father. She is very grateful for our help, and tries to earn money whenever she can. Her older sister is on board with this, and in fact is contributing $500 per month to her sister. Older daughter understands that I can't afford to gift her $15,000 per year as well at the moment, and she is fine with that.

Until now I have always treated both my children fairly and equally. But sometimes things happen to drastically change a life.
You are doing the right thing. Life did not treat both of your children fairly. So you try to help the daughter wil health issues since she cannot care for herself. The situation is transparent to all and the healthy daughter is a reasonable person. You raised your children well.

Freetime76
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Re: Equal Inheritance for Children

Post by Freetime76 » Thu Nov 14, 2019 7:53 pm

Watty wrote:
Thu Nov 14, 2019 3:53 pm
Olemiss540 wrote:
Thu Nov 14, 2019 3:09 pm
If you "cant afford" to give both children 15k per year, how are you sure there will be sufficient money left upon your demise to ensure this equality you seek?
Or even support yourself if you live exceptionally long.

There is a 50% chance that you will live longer than your life expectancy so I would not use that figure in your calculations.

It may not be likely but you could end up in a situation where you get poor investing returns because of high inflation or a prolonged bear market and also spend 10+ years in an expensive Alzheimers nursing home.

It would not take much imagination to come up with a scenario where Child B not only does not get any inheritance but they also have to pay for your nursing home since you outlived your funds.

There are lots of situations where it might be reasonable to leave your kids unequal amounts after you die so that is not so much the problem, it is that you might not really have enough to give away $15K a year
+1 to Watty’s post.

It’s your money regardless of feelings, so these comments are just food for thought:
1. My first reaction is that after you pass, self-sufficient Child B is going to end up getting screwed (if you’re trying to do 50/50), and supported Child A still is going to feel cheated since the money faucet will cease.

2. Have you considered the impact of up to 23 years of increased funds/lifestyle to Child A, after the time is up? Are you coaching toward better ways, or just sending money off into the abyss?

3. There can be many legitimate reasons for what you’re planning (single mom needs help, special needs situation etc. etc.). In the long run, my main concern is will YOU have enough for your final years?

4. Please discuss with both kids, no matter what you do. No need to ask permission, just can be helpful to understand your wishes.
Good on you for actually planning :happy - so many of us do not.

ETA: P.S. please excuse my own bias after seeing dysfunction explode with a financially supported adult sibling who had her money faucet suddenly stop at our dad’s passing. Very unpleasant.
Last edited by Freetime76 on Thu Nov 14, 2019 7:56 pm, edited 1 time in total.

Gnirk
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Re: Equal Inheritance for Children

Post by Gnirk » Thu Nov 14, 2019 7:55 pm

Dottie57 wrote:
Thu Nov 14, 2019 7:51 pm
Gnirk wrote:
Thu Nov 14, 2019 5:43 pm
delamer wrote:
Thu Nov 14, 2019 3:41 pm
It’s a can of worms.

If you have a compelling reason to give Child A money now, then discuss it with Child B. Let Child B weigh in, because surely you weren’t going to hide this payment from Child B, right?

And because it is highly likely that whatever plan you have to compensate Child B is going to backfire. As someone noted above, if you can’t afford to give Child B the money now, why do you think it will be available for Child B upon your death?
This. Discuss this with Child B.
I have two single daughters: oldest daughter has a great career and a stable life. Her younger sister had a great career and a stable life until her first "bi-polar 1 with psychosis" episode/diagnosis at age 40. Since then it's been impossible for her to keep a job for more than 4-6 months, even though she faithfully takes her medications. Right now she is unemployed with no unemployment insurance, so I am gifting her $15,000 per year, as is her father. She is very grateful for our help, and tries to earn money whenever she can. Her older sister is on board with this, and in fact is contributing $500 per month to her sister. Older daughter understands that I can't afford to gift her $15,000 per year as well at the moment, and she is fine with that.

Until now I have always treated both my children fairly and equally. But sometimes things happen to drastically change a life.
Thank you,
You are doing the right thing. Life did not treat both of your children fairly. So you try to help the daughter wil health issues since she cannot care for herself. The situation is transparent to all and the healthy daughter is a reasonable person. You raised your children well.
Thank you Dottie57.

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JoeRetire
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Re: Equal Inheritance for Children

Post by JoeRetire » Thu Nov 14, 2019 7:57 pm

Duffalo714 wrote:
Thu Nov 14, 2019 2:49 pm
How to calculate equal inheritance for children? Does anyone know a calculation for the following? I have two children, Child A and Child B. I want to give them the same monetary inheritance. I want to give Child A, who needs the money now, $15,000 a year, an advance on her inheritance, beginning in 2020 for 23 years, my life expectancy. This totals $345,000. Child B is fine financially, plus I can’t afford to give each child $15,000 a year. In my estate plan, I want to make sure both children receive the same total monetary inheritance. Can I place a fair comparative value on the $345,000 given to Child A during a 23-year period? And, therefore, subtract that amount from Child A’s future inheritance, thus ensuring that both children receive roughly the same monetary inheritance?
Every time you give $15,000 to Child A, move $15,000 into a separate retirement account - call it Account B.
Invest Account B according to your asset allocation preferences.

In your will, leave Account B (which hopefully will have grown significantly over 23 years) exclusively to Child B.
Divide the remainder of your estate equally.
Don't be a lemming.

jhd1945
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Re: Equal Inheritance for Children

Post by jhd1945 » Thu Nov 14, 2019 8:14 pm

I have two children - one who is special needs but earns just enough to support himself. I fund his Roth IRA. When I die all goes to my wife. When she dies the remainder will be split between the children - his portion reduced by the then current value of the Roth.

delamer
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Re: Equal Inheritance for Children

Post by delamer » Thu Nov 14, 2019 8:15 pm

JoeRetire wrote:
Thu Nov 14, 2019 7:57 pm
Duffalo714 wrote:
Thu Nov 14, 2019 2:49 pm
How to calculate equal inheritance for children? Does anyone know a calculation for the following? I have two children, Child A and Child B. I want to give them the same monetary inheritance. I want to give Child A, who needs the money now, $15,000 a year, an advance on her inheritance, beginning in 2020 for 23 years, my life expectancy. This totals $345,000. Child B is fine financially, plus I can’t afford to give each child $15,000 a year. In my estate plan, I want to make sure both children receive the same total monetary inheritance. Can I place a fair comparative value on the $345,000 given to Child A during a 23-year period? And, therefore, subtract that amount from Child A’s future inheritance, thus ensuring that both children receive roughly the same monetary inheritance?
Every time you give $15,000 to Child A, move $15,000 into a separate retirement account - call it Account B.
Invest Account B according to your asset allocation preferences.

In your will, leave Account B (which hopefully will have grown significantly over 23 years) exclusively to Child B.
Divide the remainder of your estate equally.
But the OP’s whole point is that s/he cannot afford to give Child B the same amount of money as Child A currently.

So where is the $15,000 to fund Child B’s account supposed to come from?

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JoeRetire
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Re: Equal Inheritance for Children

Post by JoeRetire » Thu Nov 14, 2019 8:18 pm

delamer wrote:
Thu Nov 14, 2019 8:15 pm
JoeRetire wrote:
Thu Nov 14, 2019 7:57 pm
Duffalo714 wrote:
Thu Nov 14, 2019 2:49 pm
How to calculate equal inheritance for children? Does anyone know a calculation for the following? I have two children, Child A and Child B. I want to give them the same monetary inheritance. I want to give Child A, who needs the money now, $15,000 a year, an advance on her inheritance, beginning in 2020 for 23 years, my life expectancy. This totals $345,000. Child B is fine financially, plus I can’t afford to give each child $15,000 a year. In my estate plan, I want to make sure both children receive the same total monetary inheritance. Can I place a fair comparative value on the $345,000 given to Child A during a 23-year period? And, therefore, subtract that amount from Child A’s future inheritance, thus ensuring that both children receive roughly the same monetary inheritance?
Every time you give $15,000 to Child A, move $15,000 into a separate retirement account - call it Account B.
Invest Account B according to your asset allocation preferences.

In your will, leave Account B (which hopefully will have grown significantly over 23 years) exclusively to Child B.
Divide the remainder of your estate equally.
But the OP’s whole point is that s/he cannot afford to give Child B the same amount of money as Child A currently.

So where is the $15,000 to fund Child B’s account supposed to come from?
I wrote "move $15,000 into a separate account". It could be moved from another retirement account. That Account B would remain part of the OP's retirement portfolio until passing.
Don't be a lemming.

delamer
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Re: Equal Inheritance for Children

Post by delamer » Thu Nov 14, 2019 8:21 pm

JoeRetire wrote:
Thu Nov 14, 2019 8:18 pm
delamer wrote:
Thu Nov 14, 2019 8:15 pm
JoeRetire wrote:
Thu Nov 14, 2019 7:57 pm
Duffalo714 wrote:
Thu Nov 14, 2019 2:49 pm
How to calculate equal inheritance for children? Does anyone know a calculation for the following? I have two children, Child A and Child B. I want to give them the same monetary inheritance. I want to give Child A, who needs the money now, $15,000 a year, an advance on her inheritance, beginning in 2020 for 23 years, my life expectancy. This totals $345,000. Child B is fine financially, plus I can’t afford to give each child $15,000 a year. In my estate plan, I want to make sure both children receive the same total monetary inheritance. Can I place a fair comparative value on the $345,000 given to Child A during a 23-year period? And, therefore, subtract that amount from Child A’s future inheritance, thus ensuring that both children receive roughly the same monetary inheritance?
Every time you give $15,000 to Child A, move $15,000 into a separate retirement account - call it Account B.
Invest Account B according to your asset allocation preferences.

In your will, leave Account B (which hopefully will have grown significantly over 23 years) exclusively to Child B.
Divide the remainder of your estate equally.
But the OP’s whole point is that s/he cannot afford to give Child B the same amount of money as Child A currently.

So where is the $15,000 to fund Child B’s account supposed to come from?
I wrote "move $15,000 into a separate account". That account would remain part of the OP's retirement portfolio until passing.
But the issue still is that there is no guarantee that the OP will not need to tap that account for her/his own retirement expenses.

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JoeRetire
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Re: Equal Inheritance for Children

Post by JoeRetire » Thu Nov 14, 2019 8:31 pm

delamer wrote:
Thu Nov 14, 2019 8:21 pm
JoeRetire wrote:
Thu Nov 14, 2019 8:18 pm
delamer wrote:
Thu Nov 14, 2019 8:15 pm
JoeRetire wrote:
Thu Nov 14, 2019 7:57 pm
Duffalo714 wrote:
Thu Nov 14, 2019 2:49 pm
How to calculate equal inheritance for children? Does anyone know a calculation for the following? I have two children, Child A and Child B. I want to give them the same monetary inheritance. I want to give Child A, who needs the money now, $15,000 a year, an advance on her inheritance, beginning in 2020 for 23 years, my life expectancy. This totals $345,000. Child B is fine financially, plus I can’t afford to give each child $15,000 a year. In my estate plan, I want to make sure both children receive the same total monetary inheritance. Can I place a fair comparative value on the $345,000 given to Child A during a 23-year period? And, therefore, subtract that amount from Child A’s future inheritance, thus ensuring that both children receive roughly the same monetary inheritance?
Every time you give $15,000 to Child A, move $15,000 into a separate retirement account - call it Account B.
Invest Account B according to your asset allocation preferences.

In your will, leave Account B (which hopefully will have grown significantly over 23 years) exclusively to Child B.
Divide the remainder of your estate equally.
But the OP’s whole point is that s/he cannot afford to give Child B the same amount of money as Child A currently.

So where is the $15,000 to fund Child B’s account supposed to come from?
I wrote "move $15,000 into a separate account". That account would remain part of the OP's retirement portfolio until passing.
But the issue still is that there is no guarantee that the OP will not need to tap that account for her/his own retirement expenses.
As I wrote, Account B would remain part of the OP's retirement portfolio until passing.

If the OP ends up not having enough money, then the whole "place a fair comparative value on the $345,000" thought is moot anyway

This really isn't that complicated.
Don't be a lemming.

delamer
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Re: Equal Inheritance for Children

Post by delamer » Thu Nov 14, 2019 9:26 pm

JoeRetire wrote:
Thu Nov 14, 2019 8:31 pm
delamer wrote:
Thu Nov 14, 2019 8:21 pm
JoeRetire wrote:
Thu Nov 14, 2019 8:18 pm
delamer wrote:
Thu Nov 14, 2019 8:15 pm
JoeRetire wrote:
Thu Nov 14, 2019 7:57 pm

Every time you give $15,000 to Child A, move $15,000 into a separate retirement account - call it Account B.
Invest Account B according to your asset allocation preferences.

In your will, leave Account B (which hopefully will have grown significantly over 23 years) exclusively to Child B.
Divide the remainder of your estate equally.
But the OP’s whole point is that s/he cannot afford to give Child B the same amount of money as Child A currently.

So where is the $15,000 to fund Child B’s account supposed to come from?
I wrote "move $15,000 into a separate account". That account would remain part of the OP's retirement portfolio until passing.
But the issue still is that there is no guarantee that the OP will not need to tap that account for her/his own retirement expenses.
As I wrote, Account B would remain part of the OP's retirement portfolio until passing.

If the OP ends up not having enough money, then the whole "place a fair comparative value on the $345,000" thought is moot anyway

This really isn't that complicated.
And therein lies the problem with what the OP is trying to do. The only way to be sure that children receive equal amounts of money is to give it to them at the same time.

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JoeRetire
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Re: Equal Inheritance for Children

Post by JoeRetire » Thu Nov 14, 2019 9:31 pm

delamer wrote:
Thu Nov 14, 2019 9:26 pm
JoeRetire wrote:
Thu Nov 14, 2019 8:31 pm
delamer wrote:
Thu Nov 14, 2019 8:21 pm
JoeRetire wrote:
Thu Nov 14, 2019 8:18 pm
delamer wrote:
Thu Nov 14, 2019 8:15 pm


But the OP’s whole point is that s/he cannot afford to give Child B the same amount of money as Child A currently.

So where is the $15,000 to fund Child B’s account supposed to come from?
I wrote "move $15,000 into a separate account". That account would remain part of the OP's retirement portfolio until passing.
But the issue still is that there is no guarantee that the OP will not need to tap that account for her/his own retirement expenses.
As I wrote, Account B would remain part of the OP's retirement portfolio until passing.

If the OP ends up not having enough money, then the whole "place a fair comparative value on the $345,000" thought is moot anyway

This really isn't that complicated.
And therein lies the problem with what the OP is trying to do. The only way to be sure that children receive equal amounts of money is to give it to them at the same time.
"I want to give Child A, who needs the money now, $15,000 a year... I can’t afford to give each child $15,000 a year."
Don't be a lemming.

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Re: Equal Inheritance for Children

Post by averagedude » Thu Nov 14, 2019 9:33 pm

Speaking of fairness for child A. Lets say you give child A $15000 a year and they spend it and you put $15000 a year in a Vanguard total stock market index for child B to be paid out at time of your death. You live 20 years and the stock market has been kind and has compounded at a 12% return. How is child A going to feel about child B being left with $1,225,481 and all they got was $300,000 over 20 years.

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Re: Equal Inheritance for Children

Post by delamer » Thu Nov 14, 2019 9:33 pm

JoeRetire wrote:
Thu Nov 14, 2019 9:31 pm
delamer wrote:
Thu Nov 14, 2019 9:26 pm
JoeRetire wrote:
Thu Nov 14, 2019 8:31 pm
delamer wrote:
Thu Nov 14, 2019 8:21 pm
JoeRetire wrote:
Thu Nov 14, 2019 8:18 pm

I wrote "move $15,000 into a separate account". That account would remain part of the OP's retirement portfolio until passing.
But the issue still is that there is no guarantee that the OP will not need to tap that account for her/his own retirement expenses.
As I wrote, Account B would remain part of the OP's retirement portfolio until passing.

If the OP ends up not having enough money, then the whole "place a fair comparative value on the $345,000" thought is moot anyway

This really isn't that complicated.
And therein lies the problem with what the OP is trying to do. The only way to be sure that children receive equal amounts of money is to give it to them at the same time.
"I want to give Child A, who needs the money now, $15,000 a year... I can’t afford to give each child $15,000 a year."
Right. The 2 goals are in conflict.

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JoeRetire
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Re: Equal Inheritance for Children

Post by JoeRetire » Thu Nov 14, 2019 9:39 pm

delamer wrote:
Thu Nov 14, 2019 9:33 pm
JoeRetire wrote:
Thu Nov 14, 2019 9:31 pm
delamer wrote:
Thu Nov 14, 2019 9:26 pm
JoeRetire wrote:
Thu Nov 14, 2019 8:31 pm
delamer wrote:
Thu Nov 14, 2019 8:21 pm


But the issue still is that there is no guarantee that the OP will not need to tap that account for her/his own retirement expenses.
As I wrote, Account B would remain part of the OP's retirement portfolio until passing.

If the OP ends up not having enough money, then the whole "place a fair comparative value on the $345,000" thought is moot anyway

This really isn't that complicated.
And therein lies the problem with what the OP is trying to do. The only way to be sure that children receive equal amounts of money is to give it to them at the same time.
"I want to give Child A, who needs the money now, $15,000 a year... I can’t afford to give each child $15,000 a year."
Right. The 2 goals are in conflict.
There is no conflict unless the OP unexpectedly runs out of money. Let's not overthink this and give up before trying.

In another thread, the OP wrote "I’m financially comfortable". The OP can come back and indicate if his portfolio has much of a chance of running dry or not. I'm guessing not.
Don't be a lemming.

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Re: Equal Inheritance for Children

Post by mrspock » Thu Nov 14, 2019 9:48 pm

*popcorn* as the only child of 3 who works for a living and the only one financially independent, this is very interesting to me :) . For what it’s worth, why not just ask the financially minded child for their input? My parents have done this when helping my siblings in ways which might have been perceived as inequitable by me. I think partly to seek advice, and partly just to make sure I wouldn’t be upset.

Transparency is always best IMO. If your kids are reasonable, kind hearted and see the ways the universe has conspired to stack the deck in their favor (health, addiction, intelligence, grit etc) they should understand or at least rationalize the decision.

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Re: Equal Inheritance for Children

Post by student » Thu Nov 14, 2019 11:36 pm

averagedude wrote:
Thu Nov 14, 2019 9:33 pm
Speaking of fairness for child A. Lets say you give child A $15000 a year and they spend it and you put $15000 a year in a Vanguard total stock market index for child B to be paid out at time of your death. You live 20 years and the stock market has been kind and has compounded at a 12% return. How is child A going to feel about child B being left with $1,225,481 and all they got was $300,000 over 20 years.
Well. If child A spends it, then I would say it is child A's issue. Maybe OP can present this possible scenario to child A and asks whether child A would want the money now or wait.

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Re: Equal Inheritance for Children

Post by msk » Fri Nov 15, 2019 12:21 am

JoeRetire wrote:
Thu Nov 14, 2019 9:39 pm
As I wrote, Account B would remain part of the OP's retirement portfolio until passing.
+1
The new account simply needs to be designated for the inheritance of Child B alone and the reasons mentioned in the will, to keep peace with 3rd parties, like the spouse of Child A... OP might even tell Child A about it today. I have such an account that is to be inherited only by my 2 youngest children, still in their early 20s. My other 2 children are in their mid 40s and they each received good chunks of cash when they got married. Really a no brainer and "fair enough". And if things go awry and the new account has to be depleted, so what? Sometimes the best of intentions are compromised.

On the other hand we do not know why Child A needs aid today? If it's through no fault of her own, e.g. ill health (physical or mental), then of course OP has to ask himself whether equal inheritance is at all "fair". Life is generally unfair. Nobody has a choice in the genes he is born with. Perhaps Child A simply has a genetic makeup for laziness and irresponsibility?

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Re: Equal Inheritance for Children

Post by LilyFleur » Fri Nov 15, 2019 12:43 am

If we are so concerned about being equitable with an inheritance, perhaps we should also consider the mitigating factors present in the gene pool.
For example, one child receives a medical diagnosis at age 20 which forever limits him/her in their ability to accomplish a college degree, a demanding career, etc., while the other child does not have this limitation.
OP hasn't let us know the situation.

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Re: Equal Inheritance for Children

Post by Stinky » Fri Nov 15, 2019 7:25 am

LilyFleur wrote:
Fri Nov 15, 2019 12:43 am

OP hasn't let us know the situation.
It will be interesting to hear OP's thoughts about the alternatives presented by BHs.
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8foot7
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Re: Equal Inheritance for Children

Post by 8foot7 » Fri Nov 15, 2019 7:48 am

Just an overall comment that fairness/equitability has two sides: what seems fair to you as the giver/leaver of the inheritance, and what seems fair to the person who will be disfavored by going the equitable vs. equal route. (There is always a side that ends up paying more or receiving less when amounts are not divided equally.)

Make sure that you take into account both sides - what seems fair to you may not seem fair at all to the other party. Sunshine and transparency help with this. Explaining your rationale to the disfavored party and not making it a big secret or leaving it until after death to discover can make a big difference.

Speaking for myself, as a parent I understand the intense drive to, for instance, help a disabled child, but I also would not want to unfairly "punish" another non-handicapped child of mine by giving significantly less, especially at death--that one last bailout, so to speak. I could easily defend supporting the needy child while alive, but at death I don't think I would want my last gifts to be substantially one-sided.

Perhaps my non-handicapped child had had a successful career, done and saved well, and my last gift could make an early retirement possible? Would that child resent the other child for having that possibility removed? "They gave him money all his life and then he got the lion's share of the money when Dad passed. I guess I've been on my own this whole time." It would be human to have those thoughts, even if impolite or never aired.

Then again my funds are not limitless and in my previous example, a secure retirement might never be possible for the handicapped child.

So maybe equal is too much to ask for, but I think at death with those final amounts I'd be shooting for as close to equal as I could justify, rather than trying to rationalize disparate amounts, and I'd explain the plan well in advance of my death once it was fully baked, and later as well if anything changed.

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Re: Equal Inheritance for Children

Post by rivercrosser » Fri Nov 15, 2019 12:00 pm

Wife is always fretting about treating our two equally when we're gone.We helped both of them out quite a bit, only because we could afford it and wanted to. They both have always worked and luckily turned out ok. Got them through college, first cars etc. I can tell you practically every dollar we ever spent on them. To keep it simple we have all accounts and property set up 50/50 on beneficiaries. Son is single, daughter is married and has one child but that's their choice. We considered them equal after college. Been keeping track of what we spent on them since college. Helped with sons down payment on his house and little on his truck. Helped the daughter with down payment on some property. She talked about getting a masters to get a nurse practitioners license. She didn't ask but we helped her out anyway the last couple years with that. Daughters is about 26,000 ahead so we might help son pay on his house just to even things out. Then were done I swear. If long term care doesn't deplete our savings they will make out good.

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Re: Equal Inheritance for Children

Post by MMMM » Fri Nov 15, 2019 12:50 pm

About 10 years ago, my mom helped out my sister to the tune of $15k. Invested in the S&P 500, it would be worth $48k today. If my mom's around for another 10 years, it'll be worth $100k or so.

A couple years ago, mom redid her estate planning and suggested subtracting the $15k from my sister's eventual inheritance with no adjustment for growth. Here's the thing - even though $15k 10 years ago compounded into the future is a fairly significant amount of money, $15k subtracted from her future inheritance is rounding error in my financial picture, but possibly life changing money for my sister. And mom will be gone, so I'll be the one who has to deal with any jealousy or resentment for mom "evening things out" at inheritance time.

So when she talked to me about it, I said "it'll be much easier for me for your to split things evenly". And it's true. If her concern was 100% equality, she would have given me $15k ten years ago, or made an adjustment for not spending $15k of her money ten years ago. But if we look at equity, it's totally reasonable to not adjust the inheritances for something that at that point will be 20 to 30 years in the past.

I'll say that the issue of having one child "in need" and one child who is self supporting is going to raise issues no matter how you approach it. Ultimately, there's some "unfairness" in this situation to both children, depending how you approach it.

Edited to adjust the numbers up top.

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Re: Equal Inheritance for Children

Post by Stoic9 » Fri Nov 15, 2019 1:35 pm

rivercrosser wrote:
Fri Nov 15, 2019 12:00 pm
Son is single, daughter is married and has one child but that's their choice.
I like this, I've had people ask my advice about leaving money to GK and or GGK. My advice is no, you should know how many kids you have (and at your age 99% chance that will not increase), you do NOT know how many GK or GGK or GGK you have. They are not your kids. If leaving money it should go to kids, up to them to support/provide for their kids etc.

delamer
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Re: Equal Inheritance for Children

Post by delamer » Fri Nov 15, 2019 1:56 pm

Stoic9 wrote:
Fri Nov 15, 2019 1:35 pm
rivercrosser wrote:
Fri Nov 15, 2019 12:00 pm
Son is single, daughter is married and has one child but that's their choice.
I like this, I've had people ask my advice about leaving money to GK and or GGK. My advice is no, you should know how many kids you have (and at your age 99% chance that will not increase), you do NOT know how many GK or GGK or GGK you have. They are not your kids. If leaving money it should go to kids, up to them to support/provide for their kids etc.
It doesn’t have to be either/or.

You can leave each grandchild a fixed dollar amount or a percentage, and split the remainder between your kids. Or 20% is split between all grandchildren and the remaining 80% is split between the kids.

The best method depends on several factors, including the estate size.

I love the idea of (future) grandkids getting something directly from us.

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Re: Equal Inheritance for Children

Post by Broken Man 1999 » Fri Nov 15, 2019 2:03 pm

Stoic9 wrote:
Fri Nov 15, 2019 1:35 pm
rivercrosser wrote:
Fri Nov 15, 2019 12:00 pm
Son is single, daughter is married and has one child but that's their choice.
I like this, I've had people ask my advice about leaving money to GK and or GGK. My advice is no, you should know how many kids you have (and at your age 99% chance that will not increase), you do NOT know how many GK or GGK or GGK you have. They are not your kids. If leaving money it should go to kids, up to them to support/provide for their kids etc.
I give via generations.

DDs get the same. All grandchildren get the same. About as fair as I can figure. Grand-kids have no say in the makeup of their family, I think the best way to divy up things is to treat all recipients equally, per generation.

And, I also don't want to depend on my daughters to pass any of our funds down to our grand-kids. Do I trust my daughters? Absolutely! Do I believe DD's are insulated from twists and turns of life? Not a chance. Divorces, deaths, remarriages, new spouses with their children... no thanks!

It is our gift to each generation, and will be given directly, no pass through. If we are making a gift, it is our responsibility to handle the gift, making sure our desires are met. I saw what happened with a sibling. Just because you have said what you wanted to happen, it simply doesn't mean squat.

DDs and grand-kids will receive via trusts, to protect DD's amounts as best as possible, and because all the grand-kids are very young.

Broken Man 1999
“If I cannot drink Bourbon and smoke cigars in Heaven than I shall not go. " -Mark Twain

rivercrosser
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Re: Equal Inheritance for Children

Post by rivercrosser » Fri Nov 15, 2019 2:25 pm

delamer wrote:
Fri Nov 15, 2019 1:56 pm
Stoic9 wrote:
Fri Nov 15, 2019 1:35 pm
rivercrosser wrote:
Fri Nov 15, 2019 12:00 pm
Son is single, daughter is married and has one child but that's their choice.
I like this, I've had people ask my advice about leaving money to GK and or GGK. My advice is no, you should know how many kids you have (and at your age 99% chance that will not increase), you do NOT know how many GK or GGK or GGK you have. They are not your kids. If leaving money it should go to kids, up to them to support/provide for their kids etc.
It doesn’t have to be either/or.

You can leave each grandchild a fixed dollar amount or a percentage, and split the remainder between your kids. Or 20% is split between all grandchildren and the remaining 80% is split between the kids.

The best method depends on several factors, including the estate size.

I love the idea of (future) grandkids getting something directly from us.
We have debated about setting up something for granddaughter. Not completely ruled it out, but I still like the idea of equal to each of our children and let them handle how they give to the next generation. It can get complicated down the road. Say for example our son marries and all of a sudden he has two stepchildren or something like that. I'm going to let them sort out their half. We are both in our sixties now and the simpler the better. Everyone's situation is different.

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Re: Equal Inheritance for Children

Post by RadAudit » Sat Nov 16, 2019 10:04 am

rivercrosser wrote:
Fri Nov 15, 2019 2:25 pm
I still like the idea of equal to each of our children and let them handle how they give to the next generation. It can get complicated down the road. ... I'm going to let them sort out their half. We are both in our sixties now and the simpler the better. Everyone's situation is different.
+1

Equal is devilish difficult to figure out while you're alive. (We're trying.) That -and BH advice for my rather uncomplicated situation - led me to the plan of equal to the children and then let them figure out what to do for their children.

The idea of equal to the children and then (some of the estate) equal to the grandkids results in unequal distribution of the total estate to which child who won the grandkid lottery. You get to figure out if that's equal and / or fair.

You can also argue that if one child is not as financially astute as the other(s), then the grandchildren may be unequally impacted. True. But how far down the branches of the family tree are you suppose to take this idea of equal inheritances?
FI is the best revenge. LBYM. Invest the rest. Stay the course. - PS: The cavalry isn't coming, kids. You are on your own.

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Re: Equal Inheritance for Children

Post by Broken Man 1999 » Sat Nov 16, 2019 1:01 pm

RadAudit wrote:
Sat Nov 16, 2019 10:04 am
rivercrosser wrote:
Fri Nov 15, 2019 2:25 pm
I still like the idea of equal to each of our children and let them handle how they give to the next generation. It can get complicated down the road. ... I'm going to let them sort out their half. We are both in our sixties now and the simpler the better. Everyone's situation is different.
+1

Equal is devilish difficult to figure out while you're alive. (We're trying.) That -and BH advice for my rather uncomplicated situation - led me to the plan of equal to the children and then let them figure out what to do for their children.

The idea of equal to the children and then (some of the estate) equal to the grandkids results in unequal distribution of the total estate to which child who won the grandkid lottery. You get to figure out if that's equal and / or fair.

You can also argue that if one child is not as financially astute as the other(s), then the grandchildren may be unequally impacted. True. But how far down the branches of the family tree are you suppose to take this idea of equal inheritances?
But how far down the branches of the family tree are you suppose to take this idea of equal inheritances? (My bold):

I would/will take it as far down as it goes in my lifetime. Doing it by generations keeps it nice and tidy, and certainly fair, IMHO. If perchance DW and/or I live to see a great-grandchild, we can simply rework to percentages currently being used to and redivide based on a new generation.

As well, if one gives directly to grandchildren (in trust, if not at age you wish for receiving), no parent will benefit by winning the grand-kid lottery, as it is never their money, it has never touched their hands. Children get exactly the same as each other, grand-kids get exactly the same as each other, great-grandchildren get exactly the same as each other.

BTW, though I really like this method, it isn't of my design. I read about the idea on this forum. I think it is excellent, and is fair.

Broken Man 1999
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Re: Equal Inheritance for Children

Post by remomnyc » Sat Nov 16, 2019 1:45 pm

I think the most important thing is transparency now to prevent resentment later. The child who may not get her fair share may be okay with it if the sibling requires more support. My sibling who was supported by my parents for 40+ years will get the same inheritance (equal share of the house, the only asset) as I, who has been providing support to my parents for 30+ years. I am 100% okay with that. On the other hand, the child getting more now may want less now if they now that they may get significantly less later when shown what the inheritance difference could be with compounding. Try to be fair, but even more important, be transparent and get buy-in to keep relationships intact when you're no longer there.

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Re: Equal Inheritance for Children

Post by texasdiver » Sat Nov 16, 2019 2:21 pm

My parents are in this EXACT position. I have two single brothers who are in blue collar professions and not remotely as affluent as my wife and me (she is a physician). The total value of my parent's estate is probably pushing close to $1 million but I don't really know.

My parents wanted to help my youngest brother purchase a modest condo in Seattle a few years ago. He was renting and rents had zero chance or being able to afford to buy on his own. So they basically fronted the down payment, which I was very much in favor of. My dad approached me for my opinion and said he intended to treat it as a partial advance on his inheritance.

They are now contemplating doing the same thing for my second brother. Again, I'm supportive. Especially because it takes me off the hook for potentially feeling obligated to help out.

What my parents are doing is treating these advances as zero-interest loans to be paid out of their estate when they depart. No fancy calculations of discount rates or net present value of past payments or anything like that. Simply a zero-interest loan that is paid back to the estate at the time of death. That's what I suggested and everyone agrees is the simplest and easiest way to go.

There is no way to anticipate all potential future scenarios about who is going to benefit most from this sort of situation. If my parent's estate continues to grow untouched every year at 8% (or whatever) then my brother would come out ahead. On the other hand, if my parents wind up depleting their estate through long-term medical care or whatever and there isn't much left when they die then the amount he owes at the time of death may be greater than what he has coming and he wouldn't get anything. There is really no way to know. So keep it simple and make sure everyone is on the same page and in agreement.

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Re: Equal Inheritance for Children

Post by willift » Sat Nov 16, 2019 2:22 pm

unclescrooge wrote:
Thu Nov 14, 2019 6:39 pm
aristotelian wrote:
Thu Nov 14, 2019 2:52 pm

Alternatively, put $15K per year in a separate account that you make TOD to the child that isn't getting the advance gifts.
I would go a step further.

I would separate all account types into 2.
Each type of account has a separate beneficiary. Only use the account earmarked for that child when making annual gifts.
After creating 2 accounts I'd suggest investing them identically and making any personal annual withdrawals for your needs 50/50 from each account. That will then allow you to provide for 1 daughters needs now and your 2nd daughter's account to grow just as your existing portfolio grows. No need for fancy formulas or calculations

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