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One of my 3 children passed away — and left behind a child. I also have a second grandkid. How do I divide my estate?

“I feel the deceased child’s offspring should get their parent’s share, but I wonder how the other grandchild would feel?” (Photo subject is a model.)Photo: Getty Images/iStockphoto

Dear Quentin,

I am a widow who had three children. I also have two grandchildren. One of my children died and was a parent to one of my grandchildren. That leaves two children and two grandchildren. They are all adults now.

Twenty-five percent each does not seem fair given that one child and grandchild could inherit half of my estate. I feel the deceased child’s offspring should get their parent’s share, but I wonder how the other grandchild would feel? I want to do what is right and fair.

I have thought of giving 30% to each of my remaining two children and 30% to the grandchild whose parent died and 10% to the other grandchild, not wanting to leave them out. Does that sound like a good plan to you? Do you have a better solution?

Mother & Grandmother

Related: ‘My wife and I are very grateful’: Our son wants to pay off our mortgage before we retire. Will this backfire?

There are other ways you can invest in your grandchildren’s future, including with 529 accounts so they can save for college.
Photo: MarketWatch illustration

Dear Grandmother,

This is not an uncommon dilemma for someone who has lost a son or daughter, and who also has grandchildren through their late child. Inheritance is the last thing most people want to deal with in the aftermath of such a traumatic event, but it makes sense to sort it out now.

You want to do right by all of your children and make sure that no one feels left out. You could leave each of your two living children and the child of your deceased child one-third shares. That would be fair, equitable and equal, given that your other grandchild will receive their share from their parents.

I like your suggestion. You could, to split hairs in an effort to be more equitable, give 30% each to your two children, 35% to your grandchild from your deceased child, and 5% to the other grandchild. I don’t think anyone could fault you for either option.

But there’s really no right or wrong answer. Parents with children — some of whom have more than one child and others who have one or none — may also balk at their inheritance being split equally, but it’s impossible to account for every scenario after you’re gone.

Sometimes those scenarios are even more complicated than the one that you face with your own estate plan. This reader wrote to me to say he had three siblings and seven nieces and nephews, and complained that his parents wanted to include the grandkids in their will.

You could give 30% each to your two children, 35% to your grandchild from your deceased child, and 5% to the other grandchild. I don’t think anyone could fault you for that.

I agreed with the overall sentiment and expressed sympathy that their inheritance would be reduced in order to put additional money aside for the seven grandchildren. As I told that reader, it’s the ultimate single supplement for childless children.

But there’s another key point, which often gets missed in such situations. Parents can leave their inheritance equally or equitably (which is what you are aiming to do) or to no one at all. But it’s hard for people with no kids to watch their inheritance shrink with each gender-reveal party.

There are other ways you can invest in your grandchildren’s future, including with 529 accounts so they can save for college. You can make annual gifts to 529 accounts, although the maximum amount allowable varies by state.

During your lifetime, you can also give your grandchildren equal sums of money, perhaps for a down-payment on a home. The annual gift-tax allowance is $19,000 a year per recipient, which means you can give that amount without having to file a tax return.

Whatever you decide, it’s your business. No one needs to know. Once you feel in your gut that you have done the right thing, you can hire a trust and estate attorney and then forget about it until or unless you need to update your will.

Related: ‘I’ve opened a hornet’s nest’: My mother-in-law lists my husband as beneficiary on her $1 million IRA. But her will says otherwise. Which wins?

You can email The Moneyist with any financial and ethical questions at qfottrell@marketwatch.com. The Moneyist regrets he cannot reply to questions individually.

By Quentin Fottrell

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