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An unequal sharing of the wealth

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When the time comes to write a will, many parents choose to divide their wealth equally, acting on a sense of fairness or a wish to preserve harmony. Yet in the past two decades, the percentage of people who leave unequal amounts to children has more than doubled, a recent study shows.

The study, published last month by the National Bureau of Economic Research, found that the share of parents with wills that allot unequal amounts to their children grew significantly between 1995 and 2010, from 16 percent to 35 percent. A key factor behind the increase is the growing number of “complex” families — defined by the researchers as blended households with stepchildren and biological children, and families in which a parent has no contact with one or more biological children (e.g., children from a previous relationship).

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The researchers drew from data on nearly 24,000 participants in the University of Michigan Health and Retirement Study, a longitudinal survey of Americans over 50 who are interviewed every two years. The survey included questions on bequest intentions, family structure, and other family-related factors.

Among parents who had created a will, 61 percent of those with stepchildren and biological children planned to divide their assets unequally, compared with 27 percent of parents with biological children only. Among parents who were divorced at the time they were surveyed, the difference was even greater (75 percent versus 29 percent).

It may seem sensible in some cases that parents would leave less to their stepchildren — they may have known each other for a short time, for instance, or not have much contact. The researchers noted that living with a stepparent for at least 7 to 10 years eliminated the stepchild “penalty.”

“We were surprised to see the extent to which stepchildren who had spent a long part of their childhood with a stepparent were treated the same as their biological children,” said study co-author Robert Pollak of Washington University in St. Louis. “One can tell stories that parents are going to favor their biological children, but it looks as though that wasn’t the case for those who were stepchildren from an early age.”

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For parents without contact with at least one biological child, the researchers also found a high proportion of unequal bequest intentions. Only 57 percent of these parents said they planned to include all of their kids in their will, compared with 84 percent of parents with regular contact with all their children, and even fewer, 47 percent, said they would give their kids an equal share. Perhaps unsurprisingly, parents who expected future help from their estranged biological children were considerably more likely to include them in their will.

While the study focused largely on complex families, there are, of course, other scenarios in which parents might choose to pass on their wealth unequally. Perhaps parents gave more to one child in the past — paying his or her way through medical school, for instance — and decide to leave more to their other children. Or, parents may decide to split assets unevenly to try to put their kids on more equal footing.

“If two children have very different levels of financial security, parents may choose to leave more to the one who is less secure,” said Matthew Karr, founder of the Heritage Law Center, an estate planning and elder law firm in Woburn. “Or, if one child doesn’t have a house, they might leave that child their house, and leave the other child money that may or may not equal the house’s value.”

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Though parents may have the best of intentions in making these decisions, they should talk to their kids to try to prevent ill feelings between them, Karr advised. If this isn’t feasible, they should write a letter to be read with the will that explains their wishes, he said.

AMI ALBERNAZ

Ami Albernaz can be reached at ami.albernaz@gmail.com.