The Importance of Equitable Estate Planning

Newsletter - 3 - 04 - 18

Have you considered the factors that may promote inequality in wealth transfer?

Suzanne is widowed and has four adult children. Her investment portfolio is worth $1 million, and she owns a bed-and-breakfast inn worth $1 million as well. Can she conveniently and equally bequeath these assets to her kids to give each child a $500,000 share of her wealth? 

This may not be as easy as it seems. “Suzanne” and her estate planning dilemma are hypothetical; the above scenario genuinely illustrates why “equal” estate planning is not necessarily equitable. 

Some estates are hard to divide fairly. This problem often surfaces when successful individuals or families have much of their net worth in illiquid assets, such as investment properties, collectibles, or private company interests. An illiquid asset can be hard to sell, and its price may need to be reduced to make a sale or exchange work. Once sold, the illiquid asset may not represent an “equal” share of the estate, only a devalued one. Moreover, the illiquid asset may be unwanted by the heir. An heir may have little desire to become a landlord or maintain a classic car collection.

Life insurance can address this problem. In the above scenario, the purchase of a $2 million life insurance policy may be a very wise move. This will boost the value of the estate to $4 million and permit “Suzanne” to bequeath $1 million in assets to each of her kids. The ownership of the $1 million bed-and-breakfast inn no longer needs to be divided. That $1 million share of the estate can be left to the heir with the most interest in real estate investment. 

The division of assets is still imperfect. The $1 million investment portfolio and the $1 million inn may increase in value. The $2 million in life insurance proceeds, while tax free, may or may not end up being invested by the other two heirs after the 50/50 split. Still, the initial distribution of wealth is more equitable, and more manageable, than it would be otherwise. 

Buy-sell agreements can address major issues for business owners who want to hand their firms down to the next generation. A well-crafted buy-sell agreement can delineate the heir(s) in control of a company’s ownership and their degree of control. It can also clearly state when and how shareholders can transfer their shares in the business to others. 

In pursuit of equitable estate planning, some families choose the blended approach. This method promises greater rewards for heirs who have made greater contributions to family wealth. It aims to distribute family assets equally, fairly, and equitably.

When the blended approach is used, the bulk of family wealth is divided equally among heirs in cash. Some assets are distributed fairly – select liquid or illiquid assets are handed down to this or that heir to suit individual priorities, needs, or wants. Then, a defined percentage of the estate is distributed equitably, based on involvement in the family business or similar criteria.1

Whether you have done much or little estate planning, the matter of equitable division of assets must be considered. In terms of asset transfer, what seems equal at first consideration may not prove equal in execution.

Important Consumer Disclosure Steel Peak Wealth Management, LLC (“Steel Peak”) is an SEC registered investment adviser with its principal place of business in Woodland Hills, California. Steel Peak and its representatives are in compliance with the current registration requirements imposed upon registered investment advisers by those states in which Steel Peak maintains clients. Steel Peak may only transact business in those states in which it is registered, or qualifies for an exemption or exclusion from registration requirements. This newsletter is limited to the dissemination of general information pertaining to its investment advisory/management services. Any subsequent, direct communication by Steel Peak with a prospective client shall be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides. For information pertaining to the registration status of Steel Peak, please contact Steel Peak or refer to the Investment Adviser Public Disclosure web site ( This newsletter is provided for informational and educational purposes only and contains information that is not suitable for everyone. There is no guarantee that the views and opinions expressed in this newsletter will come to pass. Additionally, this article contains information derived from third party sources. Although we believe these third-party sources to be reliable, we make no representations as to the accuracy or completeness of any information prepared by any unaffiliated third party incorporated herein and take no responsibility therefore. This article should not be regarded as a complete analysis of the subjects discussed. All information and expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change without prior notice. Steel Peak is not licensed to and does not engage in the practice of rendering legal or tax advice. Any discussion of either is for informational purposes only and you are strongly encouraged to seek appropriate counsel prior to taking action. The information contained herein should not be construed as personalized financial or investment advice. We are not licensed to and do not engage in the practice of rendering legal or tax advice. Any discussion of either is for informational purposes only. We strongly encourage our clients to seek appropriate counsel prior to taking action. Steel Peak Wealth Management has selected Charles Schwab & Co., Inc and TD Ameritrade, Inc., as primary custodians for our clients’ accounts. Schwab Advisor Services and TD Ameritrade Institutional serve independent investment advisory firms like ours which includes the custody, trading and support services of Charles Schwab & Co., Inc. and TD Ameritrade, Inc. As a registered broker-dealer and a member of the Securities Investor Protection Corporation (SIPC), Charles Schwab and TD Ameritrade are subject to certain regulations intended to protect assets held in brokerage accounts maintained at Charles Schwab and TD Ameritrade. Steel Peak is not affiliated with Charles Schwab or TD Ameritrade. For additional information about Steel Peak, including fees and services, send for our disclosure statement as set forth on Form ADV from Steel Peak using the contact information herein. Please read the disclosure statement carefully before you invest or send money. This message contains confidential information and is intended for the recipient. If you are not the intended recipient you are notified that disclosing, copying, distributing or taking any action in reliance on the contents of this information is strictly prohibited. Email transmission cannot be guaranteed to be secure or error-free as information could be intercepted, corrupted, lost, destroyed, arrive late or incomplete, or contain viruses. The sender therefore does not accept liability for any errors or omissions in the contents of this message, which arise as a result of any email transmission sent or received. If verification is required, please request a hardcopy version.

1 – [3/29/16]


The Importance of Equitable Estate Planning