Bay Area Estate And Tax Planning Law Firm

Why equal inheritances might turn out to be … something else

On Behalf of | Mar 29, 2019 | Uncategorized |

You love them all equally, right, so doesn’t it simply make sense to treat all your kids the same when it comes to their down-the-road inheritances?

That is unquestionably the mindset of legions of estate planners in California and elsewhere and, yes, following through on that inclination often makes perfect sense.

Note this, though: It can be harder to achieve than is often realized. A recent Kiplinger article addressing the subject of equal asset splitting among heirs duly notes that. It stresses that, for planners who seek to leave the kids with an identical amount of wealth, “the outcome might not be what you intended.”

There is a direct reason for that, which can be expressed in a single word, namely, taxes.

The Kiplinger piece spotlights an important bit of information for planning parents concerning next-generation wealth transfer. It stresses that effecting an equal distribution of assets among adult children “is an unlikely scenario.”

Here’s why: It is flatly improbable that all adult children in any family pay the same marginal tax rate. Some are fabulously wealthy, with others being at the opposite end of the asset spectrum. The Internal Revenue Service treats them differently based on that fact.

Which means this: The same amount of assets spread out equally among all surviving children will likely accrue to their accounts in materially different amounts, owing to inheritance-linked tax liability.

That potential makes for some instant complexities, but it also creates distribution opportunities that a planner can explore with a seasoned estate planning attorney who also commands an integrated background as a certified public accountant.

The estate planning goal to provide equally for all children can be realized, and optimally so with input from a proven planning professional.