Morlitz says some people buy insurance to give to the other kids. "If it's a reasonably successful business, what you do is you use some of the cash flow and buy insurance. In effect, what you're doing is letting the business buy out the other kids. That works pretty well."

A family limited partnership is another option. The business is put into the partnership, and the children who are not participating actively in the business get limited-partnership interests, resulting in them getting income from the operations but no decision-making power, Castleman says.

Andrew DeMaio, an estate-planning attorney in Matawan, N.J., adds parents could plan to have the family business become a corporation that has voting stock for the active children and nonvoting stock for the children who aren't involved.

Another choice might be to transfer the business to a charitable remainder trust. "If you establish the charitable remainder trust and transfer the business to that trust, the trust then turns around and sells it on an installment basis to the child who is going to continue the business," Castleman says. "Now the child who has the business can do what he or she wants with it, but owes the stream of income payments to the charitable trust, which distributes it out to the nonparticipant child for that person's lifetime. Whatever principal is left over after the nonparticipant child dies would go to a specific charity or foundation or something like that."

DeMaio says with a business that owns real estate, the parents may be able to pass the real estate to all the children but the business to only those involved. Another possibility would be for the business to take out loans to pay something to children who didn't inherit it, he adds.

"There's no one answer. Sometimes, the clients may give up the idea of equality and look at what's equitable," DeMaio says.

Second Marriages

How to divide an estate when there are children from different marriages can be complicated. "The problem is sometimes you have his and hers, and then theirs," Stokes says. "And then the wife inherits $300,000 or $400,000 from her family and wants to keep that separate. At the same time, she wants the estate to be there for the benefit of the surviving spouse and doesn't want to immediately give it to her kids."

Stokes says one method he suggests is coming up with a fair distribution by looking at what each partner brings to the marriage and applying percentages to the assets. "We look at his property, her property and their property. First, we add up all these baskets. Then we go back to the wife and say, 'Your basket is 30% of the whole. Let's say regardless of who dies first, 30% of it will go to your kids. We'll do ratios based on what it's worth now, and then we'll take the ratios and apply them to the plan. So when the second one dies, 30% goes to her kids, if his basket was 40%, 40% goes to his kids and the balance, 30% earned while they were married together, that goes to all of them."

Stokes adds the plan needs to be reviewed periodically and adjusted, if necessary, to take into consideration the different rates of return a husband or wife might see in their individual or joint portfolios. "I've got some folks coming back, and we did this five or six years ago, and their house, which they own together, just exploded in value, and his investments got bigger, too. So we always have to take another look."