Your Estate … with James Ward: Estate distributions can sometimes be fair and can sometimes be equal

An estate planning saying: “What’s fair is hardly ever equal, and what’s equal is hardly ever fair.”

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By James Ward

When it comes time to decide how to split your estate, you can be “fair” or “equal.” Sometimes fair is equal, but maybe not. Sometimes equal is also fair.

We have an expression in estate planning: “What’s fair is hardly ever equal, and what’s equal is hardly ever fair.”

Think about it. How does this apply to your family? If daughter is going to take care of mother, so daughter gets the house, is that still fair when mother anticipated that the care would last 10 years but she died after just three months? Does the daughter get 90 percent of the estate when she only helped her mother for a couple of months?

Clients tell me they just want to be fair, and I always ask them to not use that term because I don’t know what it means. I tell them the idea of “fair” only exists in their minds, and everyone else generally has a different idea of what’s “fair” in the family.

I drove by a property recently and remembered when I’d been there a few years ago to meet with the owner. It was an interesting environment because the elder client was mobility impaired and trying to look after her long-term boyfriend who was a raging alcoholic generally known to rant and scream every afternoon as he started drinking.

The client had two daughters and about $4 million in assets. One daughter was to get $100,000, and the two sons of that daughter were to receive $50,000 each. The other daughter was to get the balance, which would be about $3.8 million. The client didn’t explain her reasoning, but she was very clear-minded, and she knew exactly what she wanted.

The daughter and her sons getting a total of only 5 percent wasn’t to be given the documents, but the daughter getting the other 95 percent was to have a copy sent to her.

Rather than feeling grateful, the daughter getting the 95 percent called me four different times criticizing me for doing it all wrong and demanding that I change the documents because “it’s not right that my mother gives $50,000 to each of my sister’s sons and nothing to my sons.”

Really? “Yes,” she said, “my mother needs to give my sons $50,000 each or they’ll be upset. It just isn’t fair!”

With each of the first three calls from the irate daughter, I had to take a deep breath and consider whether this daughter understood basic math. When she called the fourth time to tell me that I had done it all wrong, I took the time to explain the math and explain her mother’s logic.

The sister getting the small share was getting $100,000, and her sons were getting a total of $100,000 for a grand total of $200,000 for that part of the family.

The irate sister was getting a total of $3.8 million. The client was afraid that the daughter getting the small share might not share with her sons, so she gave each of those boys $50,000 directly. She thought that upon receiving $3.8 million in tax free inheritance, the irate daughter should be able to figure out on her own how to take care of her own two sons.

And then, like magic, the irate daughter never called again. I was dumbfounded by her rants about no money going directly to her sons, and it’s one of those cases I’ll long remember.