Most of my clients, especially those who are parents, tell me that they want their post-death distribution of assets to be “fair.” However, “fair” means something different to every person.
At the outset, it is important to note that people have no obligation to be fair to anyone else in their post-death distribution plans. In fact, most people (other than spouses as to each other) can be completely disinherited as a matter of law.
I believe that parents can and should do whatever they want with everything they own. Specifically, the law governing post-death transfers by parents is based upon the parents’ intentions, and parents’ intentions are not legally presumed to be equal.
Nevertheless, many parents consider fairness to be equality. People who see equality and fairness as one and the same may not require that money from all (sold) assets be equally distributed. Instead, they may require that all assets be appraised, and then a process of selection of items among the children can be facilitated. Thereafter, cash or payments between siblings are used to “even out” differences in values of the property that was distributed.
Other parents make distributions to their children based upon need. The reasoning of these parents is that the parents know each child’s background, and the parents recognize that each child is in a different financial position. Parents may divide assets pursuant to the parents’ perception of financial or other needs of each child.
Other parents will make uneven, post-death distributions based upon the closeness of their relationship with the family member. This is literally playing favorites, which is entirely legal. Still, other parents will distribute their assets upon their deaths based upon how much healthcare and assistance was provided to the parents during the parents’ golden years.
Parents with farms or businesses will often favor the farming (or business-involved) child over non-farming (or non-family business involved) children. Sometimes, the disparate treatment is due to a perception that the family business participant earned some “sweat equity” through decades of work. Other times, the parents favoring of the family business participant is necessary just so that the family business can remain financially viable.
Although I very seldom litigate, I recently represented a farming son where his parents intended for that farming son to pay his non-farming siblings for the family farm after the parents died, under a formula with a significant discount from its value if auctioned.
After the parents died, the non-farming siblings members sued, arguing in part (also based, in part, on other legal arguments) that the discount in favor of the farming son was so extreme that its results were nowhere near equal, which near-equality the non-farming siblings sought.
The lawsuit was argued all the way up to the Ohio Supreme Court. The law properly held that my client, the farmer, could purchase the farm at the discounted price formula intended/desired by the parents. Although many technical arguments were involved, the case demonstrates that parents’ intentions (whether fair or not) override equality as a matter of law.
Lee R. Schroeder is an Ohio licensed attorney at Schroeder Law LLC in Putnam County. He limits his practice to business, real estate, estate planning and agriculture issues in northwest Ohio. He can be reached at Lee@LeeSchroeder.com or at 419-659-2058. This article is not intended to serve as legal advice, and specific advice should be sought from the licensed attorney of your choice based upon the specific facts and circumstances that you face.