This is a composite account of many cases we have worked on over the years. The names and events have been changed to avoid disclosing confidential client information.
Parents usually pass their property equally to their children at their deaths, but sometimes “equal” is not “fair” and may cause serious rifts in the family. Consider that Hank and Marilyn’s business owes much of its success to the efforts of their daughter, Mary; or that Fred and Evelyn’s family vacation home would not exist were it not for the efforts of their son, Bill; or Dick and Agnes who face the difficult task of providing for their autistic son after they pass away.
Co-owning real estate or a family business can be difficult, even in the best of families. Using a limited liability company or, to a lesser extent, a tenancy in common agreement may help, but problems can persist. There is often tension between shareholders who work in the family business and those that do not. Moreover, a child may have earned a share of an asset through “sweat equity.” Parents need to balance the needs of their special needs child against the needs of their other children.
We work with clients to develop a plan to deal with these situations. We strongly advise them to discuss the plan with all their children so the children can understand why they are making an unusual disposition of their assets. Otherwise, the children who receive less may feel their parents were unduly influenced or that their parents loved them less than their sibling.
Besides rewarding “sweat equity,” the parents’ Wills could also give a child the right to buy out his or her siblings’ shares of an asset. Thought must be given to the method for determining the buyout price and the ability of the child receiving the asset to fund a buyout. An otherwise great plan can founder if the parties cannot agree on price or the child who is buying cannot afford to do so.
The bottom line is that a well thought out plan that is fully disclosed can allow parents to manage their children’s expectations and avoid disputes down the line.
