How To Split Your Assets Without Dividing Your Family—An Estate Planning Guide

Estate planning stirs several emotions.

The impacts of your estate plan travel far beyond the paperwork and legal designations to include your family, friends, and loved ones. The situation gets even more murky with multiple heirs. While you want to think that your loved ones will make rational choices when you’re gone, love, death, and money tend to be a hotbed of unpredictability.

It’s essential to have a written plan to clearly document your wishes. A robust estate plan may not squelch family drama, but it will make your wishes clear and legally binding.

Once that’s set, discuss the plan beforehand to snuff contentious embers before they spread like wildfire. How can you structure your assets and transfer wealth without tearing your family apart in the process? Let’s take a look.

Let These Two Words Define The Wealth Transfer Process: Fair and Equitable

Dividing your estate is certainly not a walk in the park and you are free to split your assets in any manner that you find most appropriate. That said, it’s important to consider the long-term impacts of unbalanced inheritances.

It can lead to tension, arguments, and even legal battles between siblings and loved ones—not the way you’d envision your legacy to be sure. There are several elements to consider, but throughout the process try to keep the words fair and equitable in mind.

Option 1: Split Inheritance Fairly

Perhaps the most straightforward option is to divide your estate evenly among your children. That may mean ensuring that each child receives the same financial value even if it comes in different forms—IRA, insurance, property, trust, etc. Your advisor can help you determine your options for splitting your assets evenly.

It gets a bit tricky when business funds and real estate are in the mix. Perhaps one sibling wants to take over the family business and the other doesn’t or you want to leave the house to your kids but neither lives in the area. Think through what will be best for you and them throughout this process. You want your assets to be passed with intention and care—that starts with the planning process.

Option 2: Split Inheritance Equitably

You may decide that dividing your estate evenly doesn’t make the most sense for you and your family. The idea is certainly growing in popularity, but how can you go about it? Here are a few ideas.

Nail down your reasons
- Perhaps one family member requires more help/assistance than others whether it be special needs or a disability. Leaving more money to support that person isn’t likely to raise concerns.
- Maybe you gave more financial assistance to one person throughout their life—school, wedding, down payment on a house—and want to leave more to another person for who you didn’t do those things.
- You might not want to give the same amount of money to someone who has proven to be financially irresponsible.
- Perhaps your son was your caregiver and you want to leave him and his family a little more because of all the help they have provided you throughout retirement.

Decide on a method
- Select the right inheritance vehicle for your family whether that be a special needs trust (or another type of trust), investment account, family property, etc.

Communicate your intentions
- It’s important to let your children or other beneficiaries know about your plans so that no one is blindsided. The last thing you want is for your daughter to expect that she’s getting the house only to know at the last minute that you took out a reverse mortgage and she has to sell the house to pay back the loan.

It’s your estate and you have the right to divide your assets in any manner you choose. It is valuable to remember that being as fair and equitable as possible could go a long way to maintain family relationships.

Make Inheritances Intentional

Different financial vehicles offer different benefits. If you think that your beneficiaries need more structure and control, a trust could be a good choice as you can set the terms for distributions.

There’s a big difference between establishing a trust and simply naming a beneficiary on an investment account. A trust carries more structure for both income and taxable purposes. If someone inherits a brokerage account, they have access to the entire balance upfront, which might not be what you envisioned.

Your assets can also be better served in different investment vehicles. Should you leave your granddaughter a Roth IRA to help pay for school? Which vehicles will be more tax-efficient for heirs?

Make sure you work with professionals who can help you understand the pros and cons of all your options and help guide you to maximize your assets for the next generation.

Be Thoughtful About Personal Property

Often what spurs disagreements isn’t the IRA, it’s the family jewels, prized artwork, collectibles, or mom and dad’s famous china set. It’s essential to create a structured plan for your personal property.

While you may not be able to make a running list of every possession you own, start thinking about the items you have and who you would like to receive your personal assets. First, identify the items that have significant and sentimental value. This is an important distinction!

Take mom’s 5-carat diamond and great grandpa’s World War II watch. The diamond has a significant financial value and the watch, while not financially valuable, holds immense sentimental and family value.

Make thoughtful choices with each value type and consider gifting some of these items away while you’re alive. It might be more fulfilling for you to see your granddaughter wear your diamond and ruby bracelet or discuss rare manuscripts with your bibliophile son.

Your property doesn’t simply have to be divided among family members. It’s easy to get tunnel vision when it comes to giving away items but think about the person who would get the most value from an item. Say that you have an extensive coin collection that your family doesn’t want but your best friend would love—give the coins to your best friend!

You may even be able to gift some of your items (like historical artifacts) to a museum. There are several avenues to consider beyond gifting items to the family. Give your things away to people who will appreciate them the most.

Involve Key Parties Early On

Your estate plan is comprised of several people from professionals like your attorney, financial planner, and CPA to your family and loved ones filling other roles like executor, power of attorney, or trustee.

The people you elect to fill these roles should be familiar with your plan and ready to act when need be. The executor of your estate should probably have a sense of your estate plan and get to know your financial team, for example.

It’s important to us that we form relationships with the people involved in your estate plan so that things run as smoothly and efficiently as possible. Your estate deserves a coordinated and efficient plan with your legacy goals in mind. It’s our job to help you craft a plan that speaks to you and your heirs.

Do you have questions about leaving a meaningful inheritance? Schedule a 15-minute call with our team today.

Advisory services are offered through Legacy Wealth Advisors, LLC dba Legacy Wealth Advisors, an Investment Advisor in the State of Michigan. The information contained herein should in no way be construed or interpreted as a solicitation to sell or offer to sell advisory services to any residents of any State other than the State of Michigan or where otherwise legally permitted.

All content is for information purposes only. It is not intended to provide any tax or legal advice or provide the basis for any financial decisions. Nor is it intended to be a projection of current or future performance or indication of future results. Moreover, this material has been derived from sources believed to be reliable but is not guaranteed as to accuracy and completeness and does not purport to be a complete analysis of the materials discussed. Legacy Wealth Advisors does not offer tax planning or legal services but may provide references to tax services or legal providers. Legacy Wealth Advisors may also work with your attorney or independent tax or legal counsel. Please consult a qualified professional for assistance with these matters.