When Children Inherit: Equal vs. Fair

There’s a key difference between “equal” and “fair” that especially comes into play when considering an estate plan or a succession plan for the family business.

“Equal” is defined as “of the same measure, quantity, amount or number as another” in the Merriam-Webster dictionary. “Fair” is defined by dictionary.com as meaning free from injustice.

If you have three children, equal treatment would be to carve your estate plan assets and/or your business assets into three parts and give each child the same amount.

However, this approach may not be fair if one of the three children has labored in the family business at low pay for several years, while the other children developed separate careers.

It’s easier to provide equal treatment, rather than fair treatment, because equal is simply a mathematical measurement that doesn’t require much thought.

Fairness is more difficult to achieve because there is no formula. Determining what is “fair” takes considerable thought, and requires judgments as to valuations of the business assets, the needs of the business for continued viability, the value of the participating child’s sacrifices for the business, tax implications of various strategies, family dynamics and so forth.

It may be impossible to be fair to all of your children, but it is important to try.

It is also important to explain to your children, while you are still alive, why you are making the choices that you are making. Otherwise, your children may not understand why they are not being treated equally in a formulaic way.

Also, the siblings’ relationships among themselves may be shattered forever if some of your children feel that they were shortchanged, and are not given a clear explanation of your decisions.

Every family and every situation is different, which makes it especially important to talk to multiple advisors, including lawyers, accountants and financial planners, at a minimum, to help you strive for fairness.

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Disclaimer: This Blog is for informational purposes only and is not to be construed as legal advice. If you have questions, please seek the advice of an attorney. An attorney-client relationship is not formed by reading this Blog. If you are interested in Wittenburg Law’s representation of you, you must contact Wittenburg Law for a determination of whether your matter is one for which Wittenburg Law is willing and able to accept representation of you.

Bonnie Wittenburg, Wittenburg Law Office, PLLC, 601 Carlson Parkway, Suite 1050, Minnetonka, MN 55305  952-649-9771 www.bwittenburglaw.com  bonnie@bwittenburglaw.com