My mom plans to pay college costs for my brother’s three kids — and take it from our inheritance. Am I being penalized for being childfree?

Trevor has never been particularly good with money and hasn’t put away much, if anything, for his kids’ education or his own retirement. He also tends to mismanage his money and, on a few occasions, has asked for handouts from his big sister and his mother.

Sue, on the other hand, is married but doesn’t have any children. She’s always played by the rules — budgeting, saving and investing her money to ensure she has a comfortable life and retirement.

While Sue doesn’t want to upset her mother, she feels like she’s being penalized for being child-free — and for being the ‘responsible’ child. What are her options?

Fair doesn’t always mean equal

While Sue isn’t opposed to the idea of supporting her nephew and two nieces with their post-secondary education, she feels it’s unfair that her brother gets an early inheritance and she doesn’t — because she’s child-free.

But unequal inheritances are more common than one might realize. More than one-third (35%) of parents over 50 plan to divide their estate unequally among their children, according to research from the University of Michigan’s Health and Retirement Study.

This typically isn’t because one child is favored over another. Maybe one child has a greater financial need, or maybe one child has already received support (such as money for a down payment on a house). Or, maybe one child helped out with caregiving duties significantly more than another.

In these cases, a parent or parents may feel that an even split may not be a ‘fair’ split.

One way to ease some of the tension is if Sue’s mother deducts Trevor’s early inheritance from his share of the estate, so they still get an equal share — only Sue will have to wait for hers until her mother passes.

Or, Sue could suggest that her mother give her an early inheritance, too — but in Sue’s case, since she’s child-free, she could use that money to invest for her own retirement. But her mother may say no to that.

It can be a hard pill to swallow, but ultimately it’s her mother’s money and she can do what she wants with it.

It may give her mother a great sense of joy to help out her grandchildren. Nor should her grandchildren have to suffer because their father is irresponsible with money.

The average annual cost of college in the U.S. is $39,406, including tuition, books, supplies and living expenses — more than double what it was at the turn of the century, according to the Education Data Initiative (based on the latest available data from the 2023-2024 academic year).

While the cost for a student attending an in-state, public, four-year institution and living on-campus was, on average, $28,349 per year, a student attending a private, nonprofit university paid an average of $60,924 per year — with a hefty $39,408 of that going toward tuition and fees.

“Considering student loan interest and lost potential income, investing in a bachelor’s degree can ultimately cost upwards of $500,000,” according to the Education Data Initiative. The average undergrad borrower spends the next 17.5 years paying off their student debt.

Helping a child cover their education costs — even partial costs — can give them a significant leg up on life.

529 plan or trust?

Sue is also worried that her brother will mismanage those funds (and some of it may end up in his own pocket). So she could suggest that her mother set up either a 529 plan or a trust for the grandkids.

A 529 plan is a state-sponsored college tuition account. Earnings grow tax-free, and withdrawals are tax-free for qualifying expenses such as tuition, books, supplies and room and board. The rules and tax benefits vary by state, so you’ll want to check into the specific details of your home state plan.

The advantage of a 529 plan is that it won’t count against Sue’s nephew and nieces if they need to apply for financial aid. Previously, distributions from a 529 plan were considered student income, which could affect how much aid they could apply for. But that’s no longer the case.