Dividing an estate "equally" when amounts differ

Dear Jonathan: I am a widowed mother of four adult children and I am in the process of making out a new will, and I have a question. I want to treat my children equally, but I have financially supported two of my children to the tune of $200,000 or more over the past several years. Consequently, unless they pay that money back to me, which I really don’t see happening, I don’t think it is fair to my other two children if I were to divide my estate equally among them. Any suggestions as to how I might approach this?

Jonathan says: This is a common question and there is an easy fix. What you want your will to say is that your estate is being divided equally among your four children, however, if any child owes you money at the time of your death, whatever amount that child owes is to be treated as an advancement to that child. As a result, the amount owed by the child is added back to the value of your estate before it is divided among your children and upon the division, the shares of the two borrowing children will be reduced by the amount you gave them during their lifetime.

For example, if the value of your estate at your death is $800,000 and each of the borrowing children owe you $100,000 at the time of your death, then those amounts would be added back to your estate, which would artificially inflate the value of your estate to $1,000,000 for division purposes. The $1,000,000 would be divided in equal shares of $250,000 for each of your four children, however, each of the borrowing children’s shares would be reduced by the $100,000 they received from you during your lifetime. As a result, of the $800,000 available for distribution, the non-borrowing children’s shares would be $250,000 each and the borrowing children’s shares would be $150,000 each.

When making out your will, you should seek the help of an attorney to make sure that the language is drafted properly. I would also recommend that you communicate what you are doing with your children so there are no surprises and/or different expectations when the time comes.

Good luck.

Dear Jonathan: My sister named me as the executor of her estate in her last will and testament and I am also the sole beneficiary of her estate. She passed away a few weeks ago. She doesn’t have a lot in the way of assets, but she does have a house, a bank account and some investments in addition to her personal belongings. When I took her will to the bank to have the account transferred to my name, I was told that that couldn’t happen until a probate was opened and I was appointed by the court as the executor of the estate. I always thought that if you had a will, probate would not be necessary. Now I am confused and do not know what to do.

Jonathan says: It sounds like you are confusing wills with living trusts when it comes to probate avoidance. Preparing a will has nothing to do with avoiding probate. Whether you have a will or not, assets that are titled in a person’s name alone at the time of his or her death have to go through probate prior to passing to the beneficiaries named in the will, if there is one, or if there isn’t one, to those individuals who are entitled to take under state law. If probate avoidance is desired, then a trust needs to be created and any assets which are probatable would need to be re-titled in the name of the trust while the creator of the trust is alive. Obviously, your sister did not have a trust. Consequently, your sister’s estate needs to be probated before the assets can be distributed to you.

I recommend that you make an appointment with a probate attorney in the county where your sister lived who can explain the procedures involved in probating your sister’s estate.

Good luck.

Jonathan J. David is a shareholder in the law firm of Foster, Swift, Collins & Smith, P.C., in Grand Rapids, Mich.

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