We Treat Them All Equally – (That’s Good, Right?)

We Treat Them All Equally – (That’s Good, Right?)

Someone recently asked where I stand on whether or not parents should treat all their children equally. I definitely have some strong feelings on the subject, but before answering, I decided to check my 200-plus blogs to see what I had already written on the subject.

I was surprised and disappointed to note that I haven’t really treated this subject adequately in this space, so I decided to change that here and now.

 

For Simplicity’s Sake

Now I am NOT “anti-equality” by any means, and for simple and straightforward situations, it’s clearly the way to go.

However, most families I deal with are neither simple, nor straightforward, and on top of that the sheer size of their assets makes everything more complex.

While simplicity is good, when it’s possible, in complex situations, oversimplifying can cause unintended consequences. I daresay that many parents who blindly insist on equal treatment are just being lazy.

 

Ownership and Management

A major complicating factor that often arises in such families is the distinction between ownership of assets and their management. This is especially true where there is an operating business that constitutes the bulk of the family’s wealth.

The simplest illustration is a family with three children, only one of them working in the business, but ownership given to the three equally. The one managing the business will be in a difficult position, unless they have very understanding siblings (and in-laws!).

Running a business can be challenging enough without having to answer to co-owners whose knowledge about it, attachment to it, and efforts towards it do not match that of the person tasked with managing it.

 

Equitable Division

Rather than simply cutting the pie into equal pieces, I encourage families to shoot for an equitable solution. Synonyms for equitable include “fair”, “even-handed” and “egalitarian”.

You see, sometimes “equal” is not fair, when you look past the simplistic solution of just making everyone identical equal partners.

Parents who leave operating businesses to their children too often do not stop to think about the fact that they are forcing their kids to become business partners, and anyone who has ever had a business partner knows that a good partnership agreement is an absolute necessity. And even then…

Unfortunately, the idea that “Well, as partners, they will be forced to get along!” will backfire much more often than it will succeed, and is NOT a recommended strategy, ever. And it does still happen, unfortunately.

 

Transparency Versus Secrecy

Assuming you actually get the fact that a simple, equal division can often be sub-optimal, then what should you look to do instead?

The possibilities are as limitless as your imagination. But better still, how about including the stakeholders in a discussion and also benefitting from all their imaginations?

In fact, if all the siblings who’ll end up owning the assets together after their parents are gone are involved, and they knowingly agree to an equal split, after considering and discussing alternative scenarios, then equal actually is good.

If everything is decided in an open, fair, well-thought-out manner, with each person comfortable that they understand exactly what they are getting themselves into, then who can argue with that?

 

Worthwhile Discussions

Are these discussions quick and easy to have? Usually, NO.

Are they important and worthwhile to have? An unqualified YES.

Simplicity is good, but not if it is just the result of laziness and a lack of courage to have the discussions that are required.

Adult conversations between family members from different generations can be difficult, especially when so much is at stake. But what’s the alternative?

 

Keep Your Fingers Crossed

Many families have ended up deciding to ignore this type of advice, simply divided everything up equally, and let the chips fall where they may. “Well, that’ll be their problem, they’ll figure it out” is an interesting attitude.

If you really believe that they’ll “figure it out”, then you’re also probably the type who could have the necessary conversations, and you should.

If you say that, and are secretly keeping your fingers crossed that it’ll all work out, then you’re actually likely fooling yourself.

Good luck with that. Don’t say I didn’t warn you.

 

P.S.: What About Salaries?

If you’re paying all your kids the same salary, for vastly different job responsibilities, that’s a great place to start fixing things.