An equal distribution of wealth is usually considered a fair distribution. When each of your children receives an equal share of your wealth, it is difficult to argue that any child has been treated unfairly. An equal distribution eliminates hurt feelings, jealousy, bitterness, and family discord.
What are the factors to consider when reviewing planning solutions?
How much control each child has over business
Several factors will likely play a part in your decision to adopt any of the aforementioned planning solutions. You may want to consider who will control the family business and whether that control should be shared. When you transfer business assets to your nonparticipating children, you may also be transferring a degree of control to them, so you will want to determine whether this is appropriate and plan accordingly.
What sources of funding are available
Another factor is funding. Many planning solutions require funding. Often an equalization plan provides that stock must be repurchased or redeemed. The source of funding might be a life insurance policy, future profits of the business, a partial sale of business assets, or the personal savings of your children. The source and availability of funds may be a factor in determining which planning solution you adopt.
Whether timing of distributions will affect children
Timing of the distribution is also a factor. Several planning solutions provide that nonparticipating children receive a stream of payments over a period of years rather than a lump-sum inheritance. Some planning solutions may require participating children to temporarily share ownership of the family business until a future date. Timing considerations should be evaluated in accordance with your family’s needs.
Whether business is likely to remain liquid
Finally, the success of several planning solutions is contingent on the future success of the business. Some of your children may be relying on the performance of other children for their inheritance. The degree to which you are comfortable with such an arrangement may help you in choosing a strategy for equalizing distributions.