Business Owners: Equalizing Estate Distributions to Your Children

Equal distribution of wealth usually considered fair

An equal distribution of wealth is usually considered a fair distribution. When each of your children receives an equal share of your wealth, it is difficult to argue that any child has been treated unfairly. An equal distribution eliminates hurt feelings, jealousy, bitterness, and family discord.

Sometimes equal isn't necessarily fair

Under certain circumstances, an equal distribution may not be a fair distribution. Suppose a child has contributed a significant amount of time and effort to the success and profitability of your closely held business. This child has helped you to acquire your wealth. It may be fair to leave this child more than an equal share of your wealth when you are gone, especially if your other children have not contributed to the success of the family business.

Value of an asset may vary depending upon who receives it

If you are trying to divide your assets into equal shares, you may find that the value of a particular asset to a particular child may vary from the value of that same asset in the hands of another child. For the child who has always worked in the family business, succession may be equal to job security, status, and opportunity. For the child who has never worked in the business, succession may be equal to little more than the liquidation value of the company.

Equality of distributions is still up to you

There is no law that requires you to equalize distributions to children. It is legal to disinherit a child if you like. However, most parents seek to achieve a distribution of their assets that is at least equitable. When a closely held business is involved, this task can be challenging.

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