Dave Ciambella

There is a way! - Equitable Asset Distribution
July 13, 2007

As a follow up to my prior post pertaining to equal asset distribution, I thought it would be beneficial to expand upon the importance of addressing succession planning from an equitable asset distribution perspective. The goal is to treat your children as fairly as possible financially while minimizing the possibility of intra-family war. Developing an equitable asset distribution is most effective when the unique circumstances of each family member are considered.

Achieving an equitable asset distribution can be accomplished in a number of ways but the key is to leave meaningful assets to each child. This should significantly minimize the opportunity for resentment, jealousy and or disharmony among family members.

For example, it would be prudent to leave business interests to children who have taken an active role in the business and have proven that he or she has the capability, commitment and competency to be a successor or a contributor to the business’ future success. On the other hand, it would be prudent to leave non-business related assets such as real estate, securities, retirement accounts etc. to children who are not actively involved in the business. In some instances the value of the non-business related assets is minimal relative to the value of the overall estate. Many clients will utilize existing life insurance polices to level the playing field and in some cases acquire additional life insurance to assist if need be.

In addition to reviewing your assets and determining which assets would be most meaningful to each child, it is also beneficial to take into consideration prior gifts or asset transfers that have been made and if necessary, make appropriate adjustments to your plan.

Recently I was involved in a situation involving three children where assets were transferred several years earlier to one child who was active in the business. The child who received prior gifts benefited immensely from the appreciation of stock as well as received handsome distributions along the way. Fortunately, the parents recognized the potential for conflict and have since modified their estate plan through specific bequests in an effort to achieve an equitable estate distribution.

Depending upon the age and maturity of your children, endeavor to communicate your intentions to avoid surprises or interpretation. The good news is: there is way!

Posted by Dave Ciambella on July 13, 2007 | Comments (0)