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Who would have predicted this plotline: Agreeable and extroverted individuals are more likely to distribute wealth to their children unequally, while more calculating introverts appear likelier to divide their estate evenly among multiple heirs.

Consultant Matthew Sommer, Ph.D., CFA, CFP®, and Kansas State University Assistant Professor of Personal Financial Planning HanNa Lim came to this conclusion after analyzing data from the 2016 University of Michigan’s Health and Retirement Study. The study revealed that a solid 83% of respondents intend on leaving equal bequests to their children. About 17%, on the other hand, intended to leave unequal bequests. Among this minority, 85% completely cut out certain children, while 15% included all children but at unequal distributions.

Sommers and Lim developed a few hypotheses as to why this may be. They were shocked to find out just how wrong they were with some of their assumptions once they dug into the data. For instance:

  • Individuals described as “conscientious” are more likely to divide their estate evenly among their children. “The authors suggest that individuals with low levels of conscientiousness may not fully grasp the potential ramifications of their present decisions compared to highly conscientious individuals who carefully plan their future,” Think Advisor’s John Manganaro writes. Introverts were also highly likely to divide inheritance equally.
  • Those described as “agreeable” and who are extroverted are more likely to distribute their wealth unequally among their heirs. This surprised Sommers and Lim. “If unequal bequests are associated with family disharmony, then a negative relationship was anticipated. One possible explanation for this finding may be that a highly agreeable parent is more easily influenced by children who lobby for a large share of the estate,” they write.

Is equal distribution always the best way to go? Not necessarily. But neglecting to plan ahead and failing to understand how personalities may overshadow sound succession and estate planning is always a mistake.

According to PwC, up to 66% of small business owners don’t even have a will, much less a shareholder’s agreement, contingency procedures or exit provisions in place for their business. The family’s wealth and future of the family business may instead hinge on the whim of the benefactor at one moment in time (or three separate moments in time, as Aretha Franklin’s estate continues to prove).

It’s a reminder to lean on estate planning, legal, tax, and financial professionals to help craft a succession plan that avoids unnecessary plot twists. Feel free to contact us with questions.

Photo from 123rf.com

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