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Do gifts during life differ from bequests at death?

Feb 21, 2007 | | Comments Comments Off

Dear Liz: You recently wrote a column that endorsed an aunt’s plan to give more money to her less affluent sibling’s children for their future college education than she would give to her other, better-off nieces and nephews. I’m an estate planning attorney who has advised clients on their inheritance plans for over 45 years and I’ve found that allocating one’s wealth unequally among family members is a recipe for disaster. No one disputes that people can leave all or a portion of their money or property any way they like. However, in my many years of experience, unequal allocation will ultimately lead to conflict, disharmony and bad feelings no matter the economic or other disparity between one’s heirs.

Answer: When it comes to parents bequeathing money and property to their own children, I wholeheartedly agree. As I explained in a more recent column, these final gifts are often interpreted, rightly or not, as the parent’s last word about how much each child was valued. Even parents who feel justified in making unequal financial gifts during life–usually because they believe one child needs more than the others–should think long and hard before making lopsided bequests after death.

More distant relatives shouldn’t be held to the same standard, however, particularly when we’re talking about gifts to further a specific goal like a college education. As the aunt noted, her other siblings are able to save for their children’s educations, while she fears that at least one of her nieces won’t attend college at all if not for the aunt’s financial support.

If the money had no restrictions on its use, or if the aunt were passing out birthday checks, then yes, the amounts should be roughly equal. But to ask her to reduce her gift to the neediest child so the others can have a surplus of money for the same goal–a college education–seems the opposite of fair.

Might some relative object to receiving less or nothing at all from Auntie? Of course, but most reasonable people will understand her actions if she decides to gift according to need. At worst, they may suspect Auntie of favoritism, but that kind of partiality is a lot easier to take from a parent’s sibling than from the parent.

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Categories : Estate planning, Q&A