The Farmer's Daughters
A farmer came in to see us recently with this dilemma. He had a working farm where his twenty something daughter and her husband were engaged full-time. His other daughter worked in the arts in New York City. He wanted to keep the farm in the family, but didn't know how.
He initially wanted to leave the farm and his other assets to the two daughters in equal shares. We cautioned against this since, we advised, no one likes to do all the work and then split the profits. Additionally, real estate prices could be considerably higher on his death and there might not be enough money in the estate for the working daughter to buy out her sister. We also had to consider the sweat equity the young couple would be building up over the years working the farm. Here's how the matter was ultimately resolved to the client's satisfaction.
We deeded the farm now to the working daughter (not her and her husband quite yet) reserving a "life estate" in the farmer so that he had a right to live there for the rest of his life and preserving his senior tax exemption on the property. We established the value of the property today, and made a bequest on his death, from the farmer's living trust, of a like amount in cash to the sister before the balance of the trust was divvied up.
Now the young working couple are secure in their future, the non-working daughter gets her fair share of the estate and the farmer is protected in his rights for life. Most important of all, he has the peace of mind in knowing that the farm will stay in the family.
If you're a business owner, and have one or more children working in the business, you have the same issues. We generally like to see the "working" children take over the business and other assets used to even out the estate distribution with the "non-working" children. Where there are not enough other assets to make the distribution even, then life insurance or a mortgage can be used for this purpose, or the "working" children can pay off the "non-working" children over a period of years at a rate the family business can afford.