The other day my friend Joe received some interesting news. His uncle, who is 70 years old, had told the
family that he was going to leave his 3 nephews some money as he did not have
any children of his own.
Of course Joe was excited to hear the news, but at the same
time felt a little guilty. After all,
what if his uncle needed the money? The
uncle reassured everyone that he didn’t, but still, you never know.
At the same time, Joe is 35, married with a little baby of
his own while his 2 brothers are 30 and 27, both single, and no kids. Joe didn’t want to be greedy, but clearly his
family situation would suggest a greater use for the money than his brothers.
Joe’s uncle is planning on leaving $25k each, but is that
really fair? First, the family situation
for each is different. Joe and his
middle brother are out on their own, but the youngest still lives with their
parents. On the other hand, Joe had his
college paid for while both his brothers incurred student loans for their
education.
I suggested to Joe that they have a family discussion,
because splitting the money equally or not is a serious discussion about
values, needs and wants. Their uncle may
have his own reasons for equal shares.
At the same time, I suggested that their uncle has a way to
increase his legacy without any undue cost.
There are simple insurance strategies to use the $75k to generate a tax
free death benefit for almost $110k. In
other words, this would increase each brother’s inheritance from $25k each to
over $36k each. At the same time, the
uncle would be able to access the original $75k in an emergency if needed.
Joe really like this idea and wanted to talk to his uncle and
brothers about it. I’m sure the
insurance decision will be really easy, but how much left to each nephew will
be a different conversation. The plus
side is that insurance avoids probate and a lot of legal fighting if there are
disagreements.
So, if you were the uncle, what would you decide? What is “fair” in this case?
