While it has been said that life is not always fair, perhaps a more apt description would be that life is unequal in how it spreads the wealth. That same inequality may carry over into your family, with children of different ages, talents/skills, interests, needs, and degrees of material success.

When considering how best to divide your assets, you may believe a policy of “share and share alike” is the best solution. This is perhaps the easiest method, and often the way to avoid conflicts and complaints of discrimination, but does equality necessarily equate to fairness?

A more practical approach to division of assets may be one in which you recognize and compensate for differences in the abilities and needs of your children, even at the risk of producing some conflict. Through your estate plan, you have a chance to provide a measure of fairness that your children may not have found in their own lives.

The process is a delicate one—it is certainly more complicated than dividing a pie into equal slices. However, bringing about family fairness through an estate plan may be the last chance you have to give your children an equal footing in life or to help them compensate for misfortune or adversity.

Consider the Following Scenarios:

1. Disparity in Age: Assume you have two children, ages 22 and 14. Should you split your estate in half, even though the 22 year old has been through years of private school education and college and the 14 year old has just started public high school?

2. Income and Net Worth: Assume your daughter becomes a partner in an investment banking firm and quickly builds up $100,000 in assets, while your son becomes a high school English teacher who earns $30,000 per year. Should you leave your estate in equal parts to your son and daughter?

3. Previous Giving: Assume you have given your 24-year-old daughter $40,000 worth of stock in your business as an inducement for her to work with you. You have not, however, given your 18-year-old son a similar gift. Should you divide the assets in your estate on an equal basis?

4. Investment Results of Children: Assume you have given one child stock in Company X that has risen in value to $80,000. You have given another child stock in Company Z that has gone bankrupt. How should you then allocate the balance of your assets?

In each of the preceding examples, an equal division of property has the potential to create or perpetuate unequal results. This is not to say you cannot choose an unequal result, but it does point out the need for financial and estate planning that leads to reasoned decisions about how you leave property. Fortunately, there are ways for you to achieve fairer results.

Listen First

The first step to take is to talk with your children. You might do this on a one-to-one basis or through a family conference. Help them to verbalize their hopes, dreams, and expectations, as well as their worries, concerns, and frustrations. By listening first, you may gain valuable insights into how you can divide your estate constructively without causing hurt feelings and resentment.

The decisions may be difficult to make and carry out. Insurance can help provide additional reserves and flexibility for achieving your objectives for each child’s share. In the long run, your family will appreciate your actions in trying to reach an arrangement that addresses each child’s individual circumstances.

Pamela Chen is the Founder and Chief Investment Officer of Refresh Investments LLC, a fee-only financial planning and investment management firm with locations in Santa Monica, CA serving clients throughout Southern California and the United States.

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