Dear Carrie,
I have two grown sons: one is a corporate attorney and one teaches English at a public high school. Needless to say, their incomes are quite far apart. I'm tempted to leave my less-well-off teacher more money, but is this a good idea? And if so, what's the best way to do it?
--A Reader
Dear Reader,
Your excellent question raises some important issues about fairness and how to handle estate planning--particularly the importance of communicating with your heirs about your wishes and intentions. Even the most generous of impulses can be misinterpreted, especially those involving family and money.
Understand the emotional message of an inheritance
While I completely understand your impulse to provide extra assistance to your son with fewer resources, my natural inclination is for parents to treat their children equally, for a couple of reasons.
First, it's important to understand that both of your sons may easily perceive their inheritance as a symbol of your love or approval. Either might interpret a smaller inheritance as a penalty for his life choices. Yes, your sons are adults, but childhood insecurities can linger. A perceived slight can trigger resentment that could last for decades.
Also, things can (and do) change. One son may be earning a lot more now, but it's impossible to accurately predict the future. By the time your estate is distributed, your kids' fortunes may have altered. Just look at the financial turmoil and turnarounds of the past few years!
Finally, if you do decide to divide your estate unequally--and that ultimately may be the best decision--I caution you to proceed with care.
Talk to your sons before making a decision
If you decide that giving more to your son the teacher is really the right thing, explain your plan to both sons now, starting with the wealthier son. Be sure to present it as an idea based on each brother's economic reality--not a fait accompli. Hopefully, he'll be receptive and understanding.
If he is, the next step is to discuss your plans with your other son. A third conversation with both of them, discussing both your financial and emotional concerns, should ensure that the idea is acceptable to all concerned.
Of course, if your wealthier son is unhappy, you've got some rethinking to do. One possibility is to treat the two equally in your will, but make annual gifts to your teacher son and his family to help him out now. In 2016, you can give up to $14,000 to any number of individuals without paying a gift tax or even having to declare the gift. You could also consider other ways to help, for instance with contributions to a grandchild's 529 college savings plan.
Alternately, you might come up with an estate plan that provides more money for the teacher, but evens things out by bequeathing some family heirlooms or other nonfinancial assets to your wealthier son.
Consult with an estate planning attorney
The basic estate tax exclusion is currently $5,450,000, so unless your wealth is substantial, estate taxes shouldn't be a concern. However, I always recommend consulting with an estate planning attorney who can help you look at wills vs. trusts, consider choices for executor or trustee, and make sure everything is in order.
As for your sons, I know you're trying to be fair, so think carefully before you decide to give one of them more money than the other. After all, the last thing you want to do is to foster resentment that could live on for years after you've gone. Good luck.
Looking for answers to your retirement questions? Check out Carrie's new book, "The Charles Schwab Guide to Finances After Fifty: Answers to Your Most Important Money Questions."
This article originally appeared on Schwab.com. You can e-mail Carrie at askcarrie@schwab.com, or click here for additional Ask Carrie columns. This column is no substitute for an individualized recommendation, tax, legal or personalized investment advice. Asset allocation and diversification cannot ensure a profit or eliminate the risk of investment losses. Where specific advice is necessary or appropriate, consult with a qualified tax advisor, CPA, financial planner or investment manager. Diversification cannot ensure a profit or eliminate the risk of investment losses.
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