How Do I Divide My Assets Fairly When My Assets Can’t be Evenly Split?

Or What Does William Shakespeare Have to Do With My Trust?


Though we may wish otherwise, sometimes sibling rivalries can last long into adulthood. As a parent, you may want to leave your children equal shares in your estate. But what if your estate can’t be evenly split? How do you fairly divide your assets amongst the children to avoid increasing tension between the siblings?

We can learn a lot about what not to do from William Shakespeare’s play “King Lear.” In Shakespeare’s play, the King decides he is ready to retire and offers the largest share of his realm to the daughter who loves him best. Sparing you the gruesome details the play can be summed up as follows: Lear goes insane, bitter sibling rivalries become deadly, war erupts, and betrayals abound. Had Lear consulted with an estate planning attorney, he may have been able to avoid the messy end; instead of tearing his family apart he may have been able to leave his daughters with a peaceful, comfortable existence.

So what should you do if your assets can’t be evenly divided amongst your children? Imagine that you, like Lear, have three daughters: Gina, Rebecca, and Christine.

You also have a piece of land that has been in the family since your grandparents were first married. Neither you nor your daughters want the land to be sold outside of the family. The land is worth $1.5 million and your total estate is worth $3 million. You consider the options:

• You would like to divide the land into three equal parts and leave one part to each of your daughters. There are a few complications, however. Firstly, there is a huge grove of crab apple trees on the west end of the property, making it difficult to build on this part of the land. Whichever daughter received that third would have the difficult task of bulldozing the grove. Moreover, a manmade swimming pond in the northeast corner is highly desirable, but impossibly placed to be shared amongst all daughters. Most importantly, Christine works at a hospital in the city and she is not interested in inheriting the property.
 

• You could give each daughter an undivided 1/3 of the property. However you are skeptical of this option. Gina and Rebecca have never been able to agree on anything, and especially with Christine in the city you can’t see the three girls agreeing on plans for the property. You’re worried that after your death rather than a peaceful inheritance your daughters would end up with sibling warfare only slightly less brutal than Lear’s daughters.
  
• What if you don’t divide the land at all? Gina and her husband are still renting property while Rebecca already owns property with her husband. You could give the land to Gina. Nevertheless this still isn’t a fair division. Gina will inherit $1.5 million of property, leaving Rebecca and Christine with $750,000 each. Though they may not want the land, they may still feel jilted by the uneven division.
  
• You’re starting to wonder if there’s a fair way to divide your assets at all. Perhaps like Lear you will have to leave your daughters to fight over the estate.

There is a solution, and it’s one a qualified estate planning attorney could help you arrange. A $1.5 million life insurance policy would increase the estate to $4.5 million, leaving Gina with a $1.5 million property but also leaving Rebecca and Christine with $1.5 million of assets. Each child would inherit a fair share in your legacy, and you would finally be able to relax knowing that you’ve helped spare your children a potentially ugly rivalry.

Life insurance can be fairly inexpensive, especially if you get a “second-to-die” policy which pays off after you and your spouse are gone. If you own that insurance in a properly designed Irrevocable Life Insurance Trust, it would not be estate taxable. (For more information on an Irrevocable Life Insurance Trust, go to our website http://www.handslaw.com/daURL/EP/estate-planning-news.aspx.)

Helping families avoid a fate like Lear’s is something I have been doing for over 30 years. If you think this solution would be best for your family, or if you want more information on dividing your assets, you should contact your estate planning attorney to help you find the best solution for your family.