Our Daily Bleg: How to Fairly Divide an Estate?

A while back, we ran a bleg in which a reader needed help dividing up a loved one’s furniture and other property. Now a reader named M. writes with a trickier and more philosophical estate-dividing problem:

(Photo: Jack Hollingsworth)

My grandmother is 93 and in decent health.  She has 4 biological children, 10 grandchildren, 23 great-grandchildren and a great-great-grandchild is possible (the oldest great-grandchild is married.) She has a decent amount of assets; barring unforeseen circumstances her estate will be a few million dollars.

From the perspective of fairness, one might say the estate should be divided equally between the four children.  From a purely biological perspective, an individual wants to see that his or her genetics be passed on to future generations. In our case, while one of the children produced two grandchildren who in turn have only one of the great-grandchildren, another child produced 5 grandchildren and they in turn 10 of the great-grandchildren.

Is there a formula for dividing an estate like this that balance the equality of each child with recognizing the value of the passing on of genetics to the deeper generations?

Call me naive, but I’ve never considered gene-passing one of the factors to consider in dividing an estate. I’m sure M. would love to hear from people who’ve had experience (successful or otherwise) in a situation like this, whether from the inheritance side or the legal/accounting/consultant side.


Cindy

She should give her money to whoever she wish, even if it is no one in the family.

That said, if you must have a scheme, then divide the estate by the number of the most numerous generation (23 great-grand children) and give the money to the 4 children according to the number of grand-children they contributed. The children can then pass it on, or not.

exilio

Huh? Since when does a bent for breeding deserve reward?

Aaron Miller

I suspect the author of this question is on the more fertile side of the family.

Does Grandma care about maximizing her genetic line?

Mango Punch

A lot of people set up trusts that can be accessed by all of their descendants (for things like education etc). If I was old and had offspring, I think that's how I would do it - provide certain goods for all my lineage while splitting other assets among my children.

sdbeach

I think going to great-grandchildren and beyond is making it too complicated. A simple way is to split 1/2 of the inheritance between children, and the other half between grand-children. So, if the inheritance is $4 million, each child receives $500,000 and each grandchild receives $200,000.

Gary

Winner take all cage match....

H

The first thing that comes to mind is that anyone, including M, is found to have exerted undue influence on the testatrix as to how to she leaves her estate, the will may be invalid.

If there is a desire for 'fairness', then one option could be to divide the estate into slices (equal or different) for each generation and then divide the slice equally between the members - ie $x to the children which is divided into four equal parts, $y to the grandchildren divided into 10 parts, etc. That way, the individuals in the younger generations don't lose out compared to their cousins just becasue their own branch of the family was more numerous, and the individuals in the older generation are treated the same, no matter what their reproductive choices (or non choices).

Of course, thre lady in question doesn't have to, and may not want to, be 'fair' in this sense. She may want to leave more money to the members of the family she feels need it more, or will use it best. She may want to favour those who she likes most, or who have done the most for her. She may want to leave the lot to her neighbour, or cat, or favourite charity.

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Kyle

Perhaps she should divide the inheritance based off the amount of genetric material she provided to each person. For each of the 4 children she contributed half of their genetic material, so each child has a weighted value of 0.5. For each grand kid she contributed 25%, so they get a weighted value of 0.25. Each great-grandchild gets a weighted value of 0.125 (let's not count the great-great grandchild just yet). Therefore, there is a total weighted value of 7.375, which is 4(0.5) + 10(.25) + 23 (0.125). So each family members' share (based on genetic material from the grandmother), would be: child - 6.8% (0.5/7.375), grandchild - 3.4%(.25/7.375) and great-grandchild - 1.7%.

L

looks like we had the same idea ;)

James

"From the perspective of fairness"? You need to remember that perspective depends on where you're doing the viewing from. So from the (of course hypothetical) one kid who stayed home to take care of mom while the others went their separate ways, an equal division is hardly fair. Or perhaps Grandma has a devoted companion/nurse who'll get a big chunk of the money: the companion will think that's fair, but I bet the kids won't.

Presumably Grandma raised the kids well, gave them basic educations and a start in life: what more does she owe them? If she likes them, or some of them (or the grandkids, etc) she should leave the money to the ones she likes, or to friends and/or charities. If it was me, I'd leave it to the dogs, and let the grasping relatives go hang.

john_d

Consider distributing it per capita per stirpes (aka "by representation"). Start distribution at closest generation to decedent (i.e. in case children's generation is dead, start with grandchildren). Divide the estate by the total number of individuals of that generation currently living or dead but with currently living descendants. Distribute one share to each person in that generation still living. Take the remainder (which will only exist if there were members of that generation who have died), and repeat for the next generation (excluding individuals whose parents have already taken--they're theoretically get their share when their parent dies). See Uniform Probate Code sec. 2-106.

Keith

What we did was - my grandmother's estate was divided by her two daughters - my mom and aunt. As my mom had passed away several years prior from cancer, it was divided amongst my siblings and I as the primary beneficiaries. Of course, this was a much smaller amount than millions of dollars, so I have a feeling people will be slighted if they don't get "their fair share of cash" out of it, but it keeps it simple.

I do like sdbeach's idea though - but still, it's up to the Grandmother if she wants to break it out evenly or leave it to her children.

Enter your name

Oh, it's easy enough: you divide part of the estate per stirpes and part of the estate per capita.

I'd suggest something like this:

* Give (or set aside for) each great-grandchild a specific, moderate-to-small amount of money. This could even be done now. Something like a $5,000 US Savings Bond for educational purposes might be appropriate; if more great-grandchildren appear before Grandma's death, then another savings bond could be acquired for each one.

* Divide the remaining estate in half.

* Take one half, and share it equally between the four children.

* Take the other half, and share it equally between the 10 grandchildren.

If Grandma's estate is a bit over $4.1 million (a number selected for producing round numbers), then this scheme would result in a distribution like this:

* Each child gets half a million dollars.
* Each grandchild gets $200,000
* Each great-grandchild gets $5,000 (or whatever amount is selected).

The "branch" of the family in which one child has produced two grandchildren and one great-grandchild would receive $595,000. The "branch" with one child, five grandchildren, and ten great-grandchildren would receive $1,550,000.

The proportions can be varied as desired; rather than dividing the estate in half at step 2, you could divide it two-thirds/one-third.

I've included a small remembrance for the great-grandchildren, but I don't recommend doing much for the third generation: that there are 23 great-grandchildren now doesn't mean that more won't appear after Great-Grandma's death. For the same reason, I wouldn't include the fourth generation at all: you cannot know what will happen, and nearly all of it will happen after her death. If the third generation has just begun marrying, then the fourth generation is likely to spend the next 40 years putting in its appearance.

To make sure you don't have to pay estate taxes (because the cutoff has bounced around so much, and there's always a risk of it going down again), it might be worth making a few small gifts now (perhaps $10,000 (a year?) to the children, and maybe also to the grandchildren, if they are all adults). A small draw-down is all that is likely to be needed, if any is needed at all.

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Brian

This is yet another example of why parents should begin ranking their offspring early on. Latec0mers can be incorporated into the ranking system on a rolling basis.

L

You could do it propotionate to the percent of the individual's genes that came from her and her husband.

Children = 1 point
Grandchildren = .5 point
Great-grandchildren = .25 points
Great-great-grandchildren = .125 points

Currently, there are 14.75 points total. This means each child would be given 6.78% of the estate, grand-child would be given 3.39%, and great-grand child 1.69%.

On 2million dollars, this would equate to $135,600 for each child. $67,800 for each grand-child, and $33,900 for each great-grand-child.

notmelbrooks

The answere is not so clear if one or more of the children is deceased. Do their children get nothing or an extra share...

Tara

You're talking about the difference between passing an estate down per capita or per stirpes. Any estate planning attorney (I am a family law attorney, so don't have much expertise or experience in this area) will talk with clients about these two options. I think it's a wholly personal choice, depending on how the testator thinks about her family and "fairness."

Mike B

For tax purposes she should start writing $10,000 check every year for all of her direct descendants. For anything left over you have to first make sure that only those who have proven themselves as being responsible with their lives and with money get any sort of larger payout (or at least one that isn't in some sort of trust). Next, at each generational level the payout should be equal to avoid any sort of resentment or infighting. Rewarding a child based on their fertility rate is no better a metric than their career choice, charitable activities, etc. All are highly subjective and is bound to sew discord unless, for good or for ill, the payout is even.

Cloudesley

Are the 4 first generation children still reproductively capable? If so then it still may be fairest to divide equally.

Are all the grandchildren and great-grandchildren biologically related to the Grandmother?

The wording of the Will would have to be carefully crafted as many jurisdictions will interfere with a Will that attempts to differentiate amongst biological and adopted children.

….but from a "purely biological perspective", perhaps the Will should include a clause for DNA to be submitted by the beneficiaries. Perhaps each beneficiary's proportionate share of the Estate could be determined by the heir’s actually genetic similarity to the deceased; say a 50% similarity gets ¼ of the Will? …or more simply a pro-rata share of the Estate, based on identifiable genetics similarities, but you’ld have to draw the line somewhere as the whole human race would potentially be in for a cut.

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Caitlyn

our estate isn't nearly as large, but in making our wills we ran into similar issues - I have four siblings, all younger than me, and my husband has one older sister. Fairness would indicate splitting things evenly between the families (or giving more to his family, since he makes most of the money) but we decided to split the difference - his sister gets more than any of mine, but not as much as all of them put together. This is mostly emotionally driven, but I'm okay with that.