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Calculating fairness and equality in estate planning

Even Texans who take the necessary steps to formulate an estate plan might still sow the seeds for family disputes if the proper strategies are not implemented. Frequently, there is an issue with the division of assets and it does not have to do with their equal distribution, but their fair distribution. People who are leaving assets, property and more to their offspring will strive to be fair, however when it comes down to making the hard decision as to which child, relative or heir should receive what, more comes into the equation than just a random idea about fairness.

For example, if a person has assets that come to a certain amount of value and there are three children, the easy answer is to divide the assets between the kids. This might not be the best solution. There could be items in the portfolio - such as a farm - that one of the children does not want to be involved with. This needs to be navigated. Perhaps other assets can be traded among the children so everyone will be satisfied and there will not be discord. The same holds true for a business. A family business might have some family members heavily involved and others not playing an active role.

A strategy that might be beneficial is to have liquidity in the estate. Life insurance can add to the estate's value and increase the chance that a fair distribution will be possible. There can be a buy-sell agreement in which there are specific rights among those who own the family business. This can dictate control and how the shares are sold after the person's death. It will stay in the family as desired and the children who did not want to be part of the business will not feel as if they lost out on their fair share.

For people who are formulating estate planning documents, equal and fair can mean two different things. Many worry about the potential for rancor among family members after death. By using different tactics to avoid this, it is possible to have the family move on and get what they feel they should. To understand how to combine fairness and equality, speaking to an attorney experienced in estate planning is imperative.

Source: Forbes, "Why Your Estate Plan May Divide Assets Equally, But Not Fairly," Mark Enghrari, April 30, 2017

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