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How Will You Divide Your Wealth Among Your Heirs?

We spend our life in modern society accumulating Things and possibly accumulating money. When you take a step back and look at life on the larger scale, money is not a goal in isolation. We strive to accumulate wealth not to die with our names in various banks’ computers associated with high numbers. There must be something else we intend to do with that money, as it is only a tool, a means to an end.

Among the ability to buy and accumulate Things, having money allows us to have more options. Having money allows us to have children — although the lack of money rarely stops people from procreating. Parents who have unspent money may decide to transfer their wealth to their children as they approach or reach the end of their lives.

The decision to leave money to children is personal, and there are many arguments both for and against. But assuming you’ve made the decision to pass wealth to younger relatives, how do you decide how much each heir should receive?

One option would be to divide your estate equally among all recipients or equally among recipients of the same level. For example, with $30 million to distribute and two children and four grandchildren, you could leave $5 million for each heir. Another option would be to leave $8 to each of your two children and $3.5 million to each of the grandchildren. Either one of these options might be considered “equal.”

What if one of your children is a successful entrepreneur who is wealthy in her own right and the other is a successful non-profit manager who has not earned a fortune on their own but has struggled for an important cause? Would it still be right to leave equal amounts to each child? What would you do if one of your grandchildren is developmentally disabled and would benefit from several million dollars to cover a lifetime of health care expenses?

“Equal” is not always the same as “fair,” and it’s usually easier to determine what is equal than to determine what what is fair. How would you decide to allocate your wealth among your heirs? This dilemma could be avoided by giving your fortune to charity. However, assuming you’ve decided the money could be well cared for in the hands of offspring or other heirs, what would you do?

Published or updated May 19, 2009.

About the author

Luke Landes is the founder of shizennougyou. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about Luke Landes and follow him on Twitter. View all articles by .

{ 7 comments… read them below or add one }

avatar 1 Anonymous

I think this depends on a great number of factors.

My grandmother who is now in her 90s lives off the interest she earns, and lately as her CDs come up for renewal she has been cashing them out and giving money to each of her 4 granddaughters. It was not an enormous amount of her wealth, but for all of us it was a huge blessing, and she was glad to see us using our money whether for buying a home, saving up for a rainy day, or helping finance a child’s education fund.

At this point if I were to pass away I don’t have much in accumulated wealth, but I do have a sizeable insurance policy which would be used to pay for my children’s upbringing. Ditto with my husband.

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avatar 2 Anonymous

In general I think it’s a bad idea to give large amounts of money to children even if the money is in good hands. However, if I had to I would keep in mind that each family dynamic is different and so needs to be assessed differently. I think my decision criteria about how much to give is based on if the person made the decision for the situation they are in. In your disabled grandchild example, the child did not make the decision to have this affliction so I think he should be given more money. In financial successful child vs. non profit child example, I think if the person made the decision to go into non-profit then he should get exactly the same as the successful child. Why? Because the non profit child chose that career path. It would be unfair to the successful child to penalize him for being financially successful. Given what I know about the situation that’s how I’d go.

I am probably going to follow my dad’s philosophy which is as his kids get older, we will get a lower and lower piece of the pie until I think we will ultimately get phased out. He wanted to give us the tools for a successful life but to never expect anything unearned. Most of his money will end up going to charity.

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avatar 3 Anonymous

I don’t really expect to have any heirs…
If Money = points, when I’m dying, I expect to look back at my game of life and go, “Woot! HIGH SCORE!!!”

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avatar 4 Anonymous

I feel unless there is a need even is the best option. For me i plan to divide my remains evenly among my wife. Since i have only one this makes math easy. If i were to divide it among children and grandchildren then i first would cover needs. If Tiny Tim needed $25,000 to cover all future medical bills then he gets the $25,000. After all needs are assesed then the rest is being divided even or going to charity.

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avatar 5 Anonymous

I won’t. There are far more deserving recipients than my “heirs”.

Of course, this doesn’t count my wife. All that we have is Joint Tenancy with Right of Survivorship, so this question becomes relevant only if I outlive her.

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avatar 6 Anonymous

Our children are 6 and 10 years old, so it’s too early to tell where life will take them. As a result, our estate plan will give them all assets and insurance proceeds for health, support, welfare, maintenance, and education. In addition, they will receive 1/3rd of the remaining estate at age 30, 1/2 at 35, and the balance at age 40. This is the plan for now.

However, once they finish their schooling and become bona fide adults, it’s more likely that we’ll leave them only a small fraction of our total estate. Our view is that once you’ve provided your children with the tools to succeed, there’s really no need to continue to support them. To put it another way, once you’ve taught your children to fish, there’s no need to keep throwing them fish.

Some will view this as a little on the cold side, but the remainder of the estate will be put into a foundation that will have a focus of teaching more people to fish, so to speak.

I’ve always been struck by the idea of economic outpatient care (EOC) that was described in The Millionaire Next Door. I believe there is a great deal of truth to this and we will structure our estate to prevent EOC once we’re sure our kids can handle things on their own.

As to your question of how to divide an estate in light of beneficiaries’ varying means, it’s important for anyone to discuss these things with their children prior to dropping a big surprise on them at the reading of the will. Any distribution that might be viewed as ‘unfair’ by any beneficiaries is likely to cause a great deal of strain on your family after you’re gone. The best method is to discuss these things openly and honestly. If you do have one child that is very wealthy, he or she may not even want the inheritance. Also, if one of your grandchildren has a special need, everyone in the family might understand why you would leave more to him/her.

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avatar 7 Anonymous

People like you disgust me.

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