Opinions sought (inheritance)

In My Humble Opinion
1

TL;DR

I really don’t know where to look for advice on this subject. I am asking for opinions than actual advice.

Here is the situation. My wife and I are in our late 80s. We have assets that will likely be in the neighborhood and C$1,5M and we have three kids. Our wills provide that each of us inherits everything from the other and then the estate will be divided equally among the kids. Simple enough. So what is the problem?

The problem is that their needs are not equal. So let me describe their situations. The middle one is literally a MicroSoft millionaire. From things he has said I think he probably retired with about $10M. He didn’t work for a while, then got bored and got another job, a kind of gig job where he works as little or as much as he wants. In fact, he had retired earlier because he wanted to help raise his four children. When the youngest started school he went back to MS and worked another ten years before retiring for good about 10 years ago. Now all his kids are grown and launched and he bought a winter home and small boat on a lake in LA and he and his wife are enjoying life. He can work from anywhere, including here in Montreal when he visits.

My younger son has a good job with good pay and his wife is a doctor. I don’t know for sure but I think they likely earn $400K together. She is a family physician or she could earn more. They are certainly comfortable, but I would not call them wealthy (unlike his brother). Their only son is off to college in September. He is going to St. Andrews in Scotland and I don’t think he intends to settle in the US eventually.

The problem is my daughter, or rather her in-laws. Let me mention that her husband is one of kindest people I have ever met. He works for Amazon. He worked for a small software company but they were sold to Amazon. He is well-paid and so is my daughter. They may make around $200K. They have one son a rising HS senior who will not discuss college although he recently took the SAT, but they don’t the scores. But her husband has a severely retarded brother (born microcephalic) who cannot live by himself. He also has a sister with mental illness. After she split for her husband and gave up custody of her son, she moved back with her parents and hardly ever leaves her room. The mother died last year. The father is coping so far and the sister has become somewhat helpful. Nonetheless, it is not clear if she can ever live alone either.

So the problem is that she is the one who will really need the money in the future. On the other hand we don’t want the boys to imagine we love them less. Unfortunately, when it comes to inheritance, people imagine that Love = Money. I am not sure how old the father is, but it cannot be much less than 80, since he married in 1970 (six years to the day after we did).

So I throw it open to the Dope. Any thoughts? Let me add that the kids get along great with each other. We have zoomed with them almost once a week since 2020 and it is a pleasure to see them interact. I wonder whether a note to my middle son asking him to share his inheritance with his sister would suffice.

2

I recommend talking to your children to explain why you plan an unequal distribution.

3

I think this is the right approach for you too. It sounds like you have a loving, understanding family. Finances don’t have to be a secret. Talk to them and explain the situation. It may very well be that they say, yes give it all to the daughter, she’s the one that needs it the most. If that is the case, then you are all on the same page and your decision is easy. If not, then at least you know where they stand and you can make a better informed decision, whatever you decide. Keeping things secret can engender bad feelings when you pass if things are not split equally and that was not their expectation.

4

If the children don’t find out the distribution until you die, they will be robbed of the opportunity to get an explanation (though it may be obvious in this case, it’s often not).

5

BTW, I don’t think you should phrase it that he’s sharing his inheritance but instead that you plan an unequal distribution.

6

In a loving family situation such as yours, I think your children will surprise you about how they feel about their inheritance. In a good way.

I would suggest speaking to each one individually to share your concerns and feelings. Start with your sons. I’ll bet they will be onboard with your hope to support your daughter and her husband. If not, you’ll find out before it becomes an issue. If so, problem solved. If not, you can work it out before sharing the plan with all of them on one of your regular Zoom calls.

@Dewey_Finn makes a good point. Handle it before there is no opportunity to sort out bad feelings, if they become an issue.

I agree these things needn’t be secret, and it’s best to discuss them openly and forthrightly. Not possible in all families – but it sure sounds like yours will manage it just fine.

My best to you, and please let us know what you decide!

7

Talk to them about the distribution in advance. I don’t know that people always think love = money when it comes to inheritance as long as it doesn’t mean that someone essentially gets disinherited so don’t do that. Also don’t leave money to your middle son and ask him to share with his sister. First, because if you give it to him and he does share it, it’s no different if you gave it to her in the first place. If giving it to her would cause him to have feelings, so would giving it to him and asking him to share it with her. Also, it might cause friction between him and her if you give it to him and he shares it with her - maybe they don’t agree on what a fair split is, for example.

My mother has arranged her afffairs in such a way that I guarantee some of us won’t be speaking to each other after she dies. That’s what you really want to avoid if possible.

8

I would agree with the rest of the commenters that communication is key, and as long as you have functional relationships with your progeny, you should talk to them separately and if possible together about what you’re thinking. Lead with your values - point out that you love them equally but their needs and resources are not equal, and that you’d like to have them inherit on the basis of both. A lot of people don’t integrate their next generation into their estate planning; the difficult talks they avoid in doing so will still happen after their passing, and probably be even more difficult among the siblings and heirs as a result.

One possibility you might want to consider would be to use some of your money to endow a special needs trust for your daughter’s in-laws, naming your daughter as trustee. Then split the rest of it three ways evenly. This would keep it clear what the money is used for, and might keep your sons from being resentful over your daughter’s spending on herself - which she is absolutely entitled to do! - if they see that as a different pool from what is set aside for her in-laws.

If you went that route, you might be able to endow the special needs trust from the money that would come from your survivorship inheritance, i.e. if your wife were to predecease you, the trust would come from the money she leaves you, and upon your passing the final inheritance would be an even split. Depending upon your financial situation, you may or may not be able to do something like this.

Best of luck to you, and kudos for being proactive and upfront on this.

9

Seriously, this, 100%. I’m technically on the receiving side of this equation. My father and step-mother talked to me, starting about two years ago (they’re also in their 80s, my father being 86 this year, my step-mother about two years younger).

In this case though, I’m in the “more needy” camp. My brother (the doctah) and sister-in-law (also a doctah) have ample income, though they do have two kids, while my wife and I make reasonable money (well, she does at least) and have no kids.

So my father said that previously, it was a 50/50 split, but after talking with my brother first, he is going to hedge in my favor. I don’t think it’s going to be super-mega advantageous, probably something like a 60/40 split, but since my parent’s combined assets are around $2 million US (though god knows what it is with the stock market craziness right now), that extra 10% or so is going to help.

There was also the unspoken (until -I- brought it up) assumption that the vast majority of any remaining assets and/or our own will go to my niece and nephew upon our deaths, which we already had planned to do with about 70-80% of whatever assets we ended life with. My wife is an only child, and while she has many cousins, some of whom have kids, we’re not exceptionally close, so they’d get some fun money from us, but that’s about it. Probably for a close friend as well, but they’re more likely to pre-decease us given their family medical history, and they too make a good bit of money.

Seriously, talk to the involved, and given what you’ve said about the family, the extremely well off one may be supportive of doing so, and will be honored that you care enough to ask.

10

Is the (possibly unspoken) expectation that the money will be used to help fund care for her brother and sister in law?

Is that a fair expectation to place?

11

This is well said.

Yeah - probably best to discuss with them all. But - whether they say it or not, I would not be surprised if the 2 that are better off resent more money effectively going to support the in-law’s sibs.

Bottomline - do what you want - and think best. If your kids react badly - well, yu’ll be dead.

12

I would only add that if there was ever any perception of favouritism or unequal treatment among any of your children, that you ensure that is also addressed. That’s what will magnify emotions once you are gone. If none, great!

13

Excellent post for the problem
Let the well off kids decide is my 2¢ worth.

14

I agree that you should discuss the situation with all the parties. Perhaps everyone will understand and there will be no issues.

Also, you may want to set up a Special Needs trust for each of them and leave the money to the trusts rather than to any individual. This will allow them to receive money from your inheritance without disqualifying them from any public assistance they may be receiving. (This is based on my experience with California law; it may be different in other states.)

15

If you want your daughter to help support her husband’s family, probably the best thing you can do right now is set up a trust fund or annuity for the brother and/or sister. That way you can split the inheritance equally and (hopefully) relieve your daughter of any guilty feelings about supporting her in-laws.

Although IMHO, if I had a son worth $10 million, I’d ask him what charity he wants his share of the inheritance donated to, and maybe give him first choice of the family heirlooms, instead.

ETA: I see markn_1 is thinking along the same lines I am, albeit in a more sophisticated way. Obviously this is something you’ll need considerable help with for both estate and financial planning.

16

This.

FWIW, my mother left her (much smaller) estate almost entirely to me – because I was the one who needed it (and also possibly because I was the one who stepped up and did nearly all the assistance work in her last few years.) My sister and BIL showed no sign at all of objecting to this; they asked me for a couple of particular pieces of furniture, which I gave them, and that was it. I think they knew she was going to do it that way, I don’t think it came as a shock to them. Your children may well react the same way.

17

I’m gathering from this

that he’s in Canada.

A quick google shows that there are Henson trusts there which may even be better?

And that can be set up to go to each of the kids’ kids upon death of the disabled in-laws.

Not a lawyer and not a replacement for a family discussion but discussing that sort of option with a professional seems like a smart approach to me.

18

My mother went to her grave, and beyond, swearing that she didn’t play favorites between my brother and me. She also left him the house.

The thing is, my brother needed it more than I did, but she never said anything about that. Screw the money, I wish she’d cared and trusted me enough to actually talk about stuff.

19

Yes. They’ll know all sorts of things about setting up trusts for the husband’s siblings and dividing up estates (having just done this myself).

You can also put paragraphs in your will explaining your reasoning. I recommend this, even if you’ve already discussed it with your kids.

20

I was going to suggest dividing your assets into 2 groups some way (like your real estate & vehicles in one group and investments in another) and then divide one group equally and leave the other to your daughter for these medical needs. And explicitly explain all this in your will.

But Sunup’s idea is even better – the trust is set up while you are alive and able to explain all this; the income growth in the trust is not taxable income to you; and this ensures that this money is spent on these medical needs, and not squandered by your daughter (though she doesn’t sound like that type). [Should probably have a clause in there in case the trust beneficiaries die, reverting the remaining money in the trust to your daughter/equally between your 3 children\to some charity.]

And talk to an estate lawyer, both to set this up properly, and because there may be ways to do this giving you tax advantages.
Plus, do talk to all your children, either together of individually, and explain what you are doing and why.