Your Personal Finances

Family Issues

My grandmother will be 90 years old this year. She's dating a man who is 93. They never argue. I think it's one of the benefits of getting older. You know, you mellow out with age. On the other hand, it could be that they don't argue because they can't hear each other. I'm not sure which it is.

And then there are the challenges of getting older. For example, you have to be more careful about what you eat. Eventually, your cardiologist will suggest that you live by the nutritional rule of thumb: If it tastes good, spit it out.

Another challenge of aging is deciding how to deal with your children in your will. Some of your kids may disappoint you, some may have special needs, and some may have no idea how to handle money. Today, I want to talk about dealing with your children in your will.

The rule Every family is different. There's no one-size-fits-all solution to leaving an inheritance to your kids. Still, there's some general advice that, from experience, I can tell you makes sense: Treat your children equally. "But my children get along well, I have good reasons for treating them differently, and they'll understand my intentions when I'm gone."

Hogwash. It doesn't matter how well your kids get along today, or how well intentioned you are. When money is at stake, treating the kids differently will result in hurt feelings at best, and litigation and alienation at worst. Further, your reasons for discriminating against certain family members today may not be appropriate at the time of your death. Circumstances can change. But you may not get around to changing the wording of your will soon enough. And once you're gone, the damage is done.

If you want to treat the kids unequally, the best approach is to do this during your lifetime. This way, you can explain why you're doing what you're doing. If you simply treat the kids differently in your will, they may wonder why you waited until death to play favourites, or to "punish" them.

If you don't think your child can handle the inheritance you might leave to them, use a trust to control the distribution of those assets rather than leaving them with less. It's common for parents to leave a particular child's share in trust, with instructions to pay out the assets of the trust over some period of time - perhaps a little each year, much like a pension.

The exceptions There may be some situations where leaving your assets equally to the kids does not make sense. If you have a mentally or physically challenged child that needs your financial support, your first priority should be to look after that child. Even in these situations, it's common for parents to consider purchasing life insurance to equalize the estate so the other kids receive the same amount in the end.

Another common exception is when there is a family business. One of the worst things you can do is leave the business equally to the kids when the kids are not equally involved in the business. This is a recipe for disaster. The objectives of the children working in the business will likely be very different from those who are not, and this is sure to cause disagreements. Leaving the business to those children who are actively involved makes the most sense. Again, life insurance can be a great equalizer so that the kids receive approximately the same value when you're gone.