I have had a couple of interesting conversations with clients this week about what constitutes ‘fairness’ when distributing an estate.<\/p>\n
This is a really subjective issue and one where I am not sure there is a single right or wrong answer.<\/p>\n
The main area where this question arises is when distributing an estate between two or more children who may have enjoyed varying degrees of financial\u00a0success\u00a0in their own right. It could well be that one child has pursued\u00a0a more lucrative career path than the other and so now finds themselves in a much more comfortable financial\u00a0position than the other.<\/p>\n
In this case, there are broadly 2 options available to the parents\u00a0as we consider their estate planning:<\/p>\n
<\/p>\n
1. Divide the inheritance equally between the two, irrespective of their own financial resources.<\/p>\n
2. Weight the inheritance in favour of the less well off beneficiary, perhaps in a 70\/30 split for example.<\/p>\n
What is ‘fair’ is ultimately for each family to decide and I am not sure that we as advisers can (or should) say which of these is the ‘correct’ way to distribute assets as each family will have their own views and opinions on this important issue.<\/p>\n
What I can say however from many years of experience and seeing both of these options pay out in practice is that option 1 is far less likely to cause any issues or divides between beneficiaries compared to option 2.<\/p>\n
With option 2, there is a risk of the better off beneficiary feeling that they have been penalised for their own hard work and success, especially if the division of assets has not been discussed between the family beforehand and the reduced inheritance comes as a surprise to the now disappointed beneficiary.<\/p>\n
On the one hand, you can see where these feelings come from – after all, why should someone receive less purely by virtue of their own hard work? On the other hand, there are many elements of our society that operate in this way – we have higher income tax rates at higher levels of income, we reduce tax allowances and reliefs with greater levels of wealth and we offer state support for those who are more in need.<\/p>\n
This question of fairness can also arise if, let’s say 2 children each have different numbers of children themselves – let’s say one of your children has 1 child and the other has 3 – making 4 grandchildren in total. If we imagine you have \u00a3100,000 that you wish to give to the grandchildren, there are again 2 ways to go about this. Option 1 would be to give each of the grandchildren \u00a325,000 while option 2 would see the \u00a3100,000 being divided into 2 (given that there are 2 children) and then those \u00a350,000 shares being divided between the grandchildren on each side of the family.<\/p>\n
Ultimately, I am not sure this is a commundrum that will ever be solved as it is simply so subjective and one’s own views will be coloured by their own life experiences, their political views and their views on each member of the family.<\/p>\n
I think the key message here is one of open communication. People don’t tend to like surprises and so much anguish and heartache can be avoided by having an open and constructive family conversation about the key issue of inheritance. By allowing everyone to say their bit, even someone who perhaps disagrees with a decision might find it easier to understand\u00a0why<\/i>\u00a0that decision was made and thus find it easier to accept.<\/p>\n
Our job as Estate Planners is to help guide families through these conversations and hopefully to ensure the smooth and harmonious transfer of wealth through the generations.<\/p>\n","protected":false},"excerpt":{"rendered":"
I have had a couple of interesting conversations with clients this week about what constitutes ‘fairness’ when distributing an estate. This is a really subjective issue and one where I am not sure there is a single right or wrong answer. The main area where this question arises is when distributing an estate between two… Read more »<\/a><\/p>\n","protected":false},"author":5,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-3493","post","type-post","status-publish","format-standard","hentry","category-uncategorised","wp-sticky"],"_links":{"self":[{"href":"https:\/\/www.buckinghamgate.co.uk\/blog\/wp-json\/wp\/v2\/posts\/3493","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.buckinghamgate.co.uk\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.buckinghamgate.co.uk\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.buckinghamgate.co.uk\/blog\/wp-json\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/www.buckinghamgate.co.uk\/blog\/wp-json\/wp\/v2\/comments?post=3493"}],"version-history":[{"count":3,"href":"https:\/\/www.buckinghamgate.co.uk\/blog\/wp-json\/wp\/v2\/posts\/3493\/revisions"}],"predecessor-version":[{"id":3496,"href":"https:\/\/www.buckinghamgate.co.uk\/blog\/wp-json\/wp\/v2\/posts\/3493\/revisions\/3496"}],"wp:attachment":[{"href":"https:\/\/www.buckinghamgate.co.uk\/blog\/wp-json\/wp\/v2\/media?parent=3493"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.buckinghamgate.co.uk\/blog\/wp-json\/wp\/v2\/categories?post=3493"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.buckinghamgate.co.uk\/blog\/wp-json\/wp\/v2\/tags?post=3493"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}