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Problems With Siblings Settling Estates

Money brings out the worst in people. One of the most remarkable things you learn when practicing estate law is how quickly families will fight over even a minor inheritance. While new lawyers expect to handle disputes over fortunes, they’re often surprised at how vicious the infighting can get over small sums. Sometimes this is the result of displaced emotion following a loved one’s death. Other times it’s because of the emotional value people attach to personal objects. An in many cases, people just want the money, no matter how little is at stake. Whatever the reason, it’s common for family members to fight over an estate. This is particularly true among siblings. If you’re making your estate plans and want to address – or better yet, prevent – fighting among your children, there are some important issues to consider.

Consider working with a financial advisor as you create an estate plan.

Have a Will in Place Before Your Death

This may seem intuitive, but many people neglect their estate plan. This almost always leads to conflict, as the courts and your relatives are left to decide where your assets end up.

The best way to prevent fighting among siblings after your death is to have a clear will that divides up your property and assets. Use a lawyer to draft this instrument. It’s worth spending a little bit of money to get this right. In particular, pay attention to two issues:

  • Specificity: Make sure that your will assigns all money, securities and other major assets unambiguously. Leaving property rights unambiguous, or leaving it for siblings to share or split ownership lays the groundwork for future fights.
  • Remainders: Make sure that your will has provisions for any additional or remaining assets that you don’t specifically discuss. These are generally called “remainder” provisions, and are designed to prevent fighting over assets that you didn’t remember to include or didn’t own at the time of drafting.

Liquidate Your Assets

Cash is liquid, divisible and completely fungible. This makes it the easiest asset to leave to multiple people since you can simply divide the total pot of money and hand it out. By contrast, specific assets, such as personal property and real estate, are more difficult to distribute. They cannot necessarily be divided and joint ownership can lead to conflict. People can also value personal property differently, making it hard to create a balanced estate among people who cannot agree on what various assets are worth.

As a result, a good way to prevent specific conflicts is to eliminate any specific things that your heirs can fight over. To the extent practical, liquidate assets and turn them into either money or tradable securities. This will simplify your estate and reduce the opportunities for conflict.

Employ a Trust

Problems With Siblings Settling Estates

For larger estates, a trust can ensure that your assets go to the appropriate places. A trust is a third-party entity which holds money, property and other assets. Usually it’s under the management of individuals you name or by a law firm.

There are two main types of trusts to choose from: revocable and irrevocable. The former allows you to place assets in it, though they’re still in your name. The advantage of this is you can swap the contents of the trust in and out freely. An irrevocable trust, conversely, takes the assets out of your name and safeguards them from creditors. However, you cannot add or remove assets freely from an irrevocable trust.

This can create a series of potential advantages. For cash and securities, the trust administrator can distribute your estate according to your wishes. For large assets, like the family home, a trust can make sure that all of your children share access instead of fighting over it. On top of this, if your children want to challenge the terms of a trust they have to use their own money. By contrast, the fees to challenge an estate generally come out of the estate itself.

Discuss Your Personal Property With the Executor of Your Estate

After someone’s death it is not uncommon for family members to simply walk off with small items of value from around their house. To a certain extent this is impossible to prevent. No amount of estate planning can keep someone from pocketing the odd wristwatch.

However, you should plan ahead for anything of particular value, whether financial, sentimental or otherwise.

Make a list of any small items or other personal property that you would like to specifically distribute among your heirs. Then, discuss this with your executor. It will be their job to make sure your heirs honor your wishes. In particular, discuss how you will protect small items of value around the home.

Rely on a Third Party

Problems With Siblings Settling Estates

Many parents will name one of their children to act as executor of their will. This can be a good idea, as you can count on your children to distribute your estate correctly. This can, however, create problems. If your children are fighting among themselves for your estate, and if one of your children is acting as executor, then there’s no one to act as intermediator.

As a result, it can be very helpful to consider involving a third party in your estate planning. One option is to name someone outside of the family as executor. In fact, many people will retain estate attorneys to act as their executor when the time comes. Absent that, you can write a third party into the will to act as a mediator if disputes arise.

Bottom Line

Sibling fights can often erupt around inheritances. However, sound estate planning can help prevent those conflicts from happening. Such planning can include a will or trust, or both in some cases.

Tips on Estate Planning

  • While it’s important to understand how you want to approach your own estate planning, don’t leave it to chance. You can work with a financial advisor to build a comprehensive estate plan, and finding one doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
  • Smart estate planning can help you avoid fights among your heirs and children. Here’s how you can start that process.

Photo credit: ©iStock.com/AntonioGuillem, ©iStock.com/kertlis, ©iStock.com/SDI Productions

Eric Reed Eric Reed is a freelance journalist who specializes in economics, policy and global issues, with substantial coverage of finance and personal finance. He has contributed to outlets including The Street, CNBC, Glassdoor and Consumer Reports. Eric’s work focuses on the human impact of abstract issues, emphasizing analytical journalism that helps readers more fully understand their world and their money. He has reported from more than a dozen countries, with datelines that include Sao Paolo, Brazil; Phnom Penh, Cambodia; and Athens, Greece. A former attorney, before becoming a journalist Eric worked in securities litigation and white collar criminal defense with a pro bono specialty in human trafficking issues. He graduated from the University of Michigan Law School and can be found any given Saturday in the fall cheering on his Wolverines.
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