Before Leaving Money to Your Kids, Read This First

Without planning and care, inheritance disagreements can unravel families.

Right now, I’m watching three of my closest friends’ families fall apart in slow motion.

All three involve a parent who died with assets left behind and adult siblings fighting over an inheritance that was unclear, felt unfair — or both.

The details are different, but the arguments sound remarkably similar. Why did she get more? Dad told me something completely different. Mom already gave him money years ago. Who gets the house? Was Dad really capable of making that decision by then?

These aren’t little disagreements that are going to blow over. The wounds are deep, and I honestly don’t know whether some of these sibling relationships will ever recover.

So if you have adult children, hear me on this: Don’t assume they’ll work it out after you’re gone.

Talking about money with your kids can be terribly awkward, especially if you’re considering leaving them different amounts. But leaving them to interpret your decisions later can be much worse.

Equal Can Get Complicated Fast

Two children? Fifty-fifty seems obvious. Three? One-third each. For plenty of families, that’s exactly right.

But life isn’t that neat. One child may be financially secure while another is struggling. You may have paid for one child’s graduate school or helped another buy a house. One may have spent years helping you while the others live across the country.

Imagine you have two children and $600,000 to leave them. One is financially secure. The other is a single parent who has struggled to save. The clean answer is $300,000 each.

But maybe $400,000 and $200,000 would give both children greater financial security. Now sit in the successful child’s chair: I worked hard and saved — and now I’m getting less because I succeeded?

There’s no formula for this. You need to know why you’re making the decision and be able to explain it. Here’s the disconnect: 97% of families say talking about estate planning is important, yet nearly half still haven’t had those critical conversations. That’s according to Fidelity’s research.

The “Daughter Tax”

There are some differences you shouldn’t ignore, though, and caregiving is a big one.

There’s even a name for the financial toll that so often falls on daughters: the “daughter tax.” It’s what can happen when one daughter becomes the default person taking Mom to appointments, handling emergencies, paying expenses and perhaps cutting back at work.

Then Mom dies and the will says everything gets divided equally.

Maybe that’s exactly what Mom wanted. But what if she repeatedly told her daughter, Don’t worry, I’ll take care of you. What if that daughter spent thousands of her own money assuming she’d eventually be reimbursed?

Now she’s saying, I gave up years of my life and spent my own money taking care of Mom. Her siblings are saying, The will says we split it equally.

You can see how fast this goes sideways.

Before Any Inheritance, There’s Mom and Dad

Here’s what I believe parents should stop and consider. Before spending too much time mentally dividing your assets among your kids, ask yourself: What if I need that money? Because this is where I see things falling apart.

What if you or your spouse will need in-home care? Assisted living or memory care costing $9,000 a month? A bathroom remodeled so you can stay in your house? Who is funding all this? Which assets will you use? Who takes over the finances if you can’t?

My friend Beth Pinsker, a CFP and MarketWatch columnist, wrote My Mother’s Money: A Guide to Financial Caregiving after managing her own mother’s finances and care. At one point, her mother’s caregivers cost about $12,000 a month. As Beth put it, “There’s not a lot of fortunes that will sustain $12,000 a month” just for caregiving.

There may be a lot less inheritance after you pay for your own care. There may be none. And that’s okay. It’s your money, and your care comes first.

And that’s actually the conversation I’d have with the kids: Here’s how Dad and I plan to pay for our care. Here’s who will handle the finances if one of us can’t. Here’s what we may need from you — and what we don’t.

Then update that conversation as life changes. Now everyone is used to talking about money, care and responsibilities before there’s a crisis. And if there is an inheritance someday, it’s what remains after you’ve taken care of yourselves.

Don’t Confuse Money With Love

To you, dividing what remains may be a financial decision. To your kids, it can feel like one final message from Mom or Dad.

“Sarah needs more help,” can be heard as “Mom loved Sarah more”. And sometimes the fight isn’t even about money. It’s Dad’s watch, Mom’s ring or the family house.

You don’t have to disclose your net worth or exactly what everyone will inherit. But if a decision could surprise somebody, explain it while you’re still here.

The Right Advisor Does More Than Manage Investments

A good fee-only financial advisor can be a neutral financial decision partner. Your advisor isn’t your attorney. But he or she can model what several years of care might cost, help you think through different choices without all the family emotion attached, and help you communicate what you’ve decided. Then your estate attorney can make sure it’s properly documented.

So don’t start with, What am I leaving my kids? Start with, How am I going to take care of myself? What do I want my kids to know? Who will do what if I need help? And what can I decide now so they aren’t left guessing later?

And whatever you ultimately leave them, try to leave one more thing intact: their relationship with each other.

I keep coming back to my three friends. To my friends who are parents with their own adult kids: Have these conversations now, while you can. Don’t leave your kids to guess what you meant later.

And to my friends who are the adult kids already in the middle of this: I hope when the money and the legal fights are over, you can find your way back to each other. Because that relationship may ultimately be worth far more than whatever you’re fighting over.

If you’d like to explore how a vetted, fiduciary advisor can help you navigate these financial decisions, you can access Wealthramp’s network anytime.