Sibling disputes often erupt after a parent dies, and it’s time to divide up the assets of an estate. Sibling disputes can result in lengthy and expensive legal actions. However, a little forethought from parents can avoid such disputes, or they can be addressed by siblings who employ savvy strategies after a parent dies. Consider the following to avoid or resolve conflict.
- Sibling disputes over assets in a parent’s estate can be avoided by taking certain steps both before and after the parent dies.
- Strategies parents can implement include expressing their wishes in a will, setting up a trust, using a non-sibling as executor or trustee, and giving gifts during their lifetime.
- After a parent dies, siblings can use a mediator, split the proceeds after liquidating assets, and defer to an independent fiduciary.
Estate-Planning Steps for Parents
Planning before death can address many of the issues that arise after a parent dies. Perhaps the most important action a parent can take is to have a will that specifies which sibling receives what in terms of property. Who inherits the house? A business? A valuable painting? The answers can be spelled out in a will.
Alternatively, a parent can give directions that the house be sold and the proceeds divided evenly. If a parent wants to leave one sibling out of the will, this is legally permissible. There is no rule on disinheriting a child. However, to avoid legal challenges by a disinherited sibling, a parent should consider discussing the matter with the child or explaining the reason in the will.
Another good practice is to use a trust to specify property dispositions after death. A parent can make a revocable trust that can be changed at any time up to death, assuming the parent remains competent.
Putting property in the joint name of a parent and child so that the asset passes automatically to the child when the parent dies is another way to avoid conflict. This can be done, for example, for a bank account, brokerage account, or real estate.
It is good practice to review and update an estate plan after a major life event, such as the birth of a grandchild.
Using a non-sibling executor or trustee for the estate can also help keep the peace. A third party who does not stand to gain from any decisions regarding property distributions may be a good idea, particularly if a parent believes there could be sibling disputes after they die.
How Parents Can Divvy Up Minor Items
Disputes over a treasured but valueless picture can cause bad feelings within the family, and those bad feelings can persist for a long time. A wise parent who anticipates that siblings may quibble over the household, or other minor, items after they die can take certain steps to thwart any problems. For example:
Give Gifts During Lifetime
A parent may want to disburse certain items before they die so that a child can enjoy the items longer—this avoids claims to them after the parent dies. For example, if a parent has two daughters, the parent might give rings, bracelets, and necklaces to each, perhaps as birthday or holiday gifts.
This gifting strategy assumes that the value of the items is below the annual gift tax exclusion. In 2020 and 2021, the annual exclusion is $15,000,. This means that tax filers can give away up to $15,000 per person without paying tax on those gifts. Items of greater value require that a gift tax return be filed and may entail gift taxes.
It may sound tacky, but putting tags on certain key items, such as a lithograph or first edition book, can be helpful. The tag should name the sibling who will inherit the item after the parent dies. While the tag does not create a legal requirement that the sibling receives the item, it is indicative of the parent’s intent and may go a long way in avoiding sibling spats.
Write a Letter of Instruction
A letter of instruction can be written by the parent outlining who gets what. Again, the letter is not legally binding but serves as a roadmap to the parent’s wishes regarding their property.
What to Do After a Parent Dies
If a parent did not take action before death, and there is a possibility of problems over distributing assets, it’s not too late to preserve sibling harmony or at least to minimize bad feelings. Consider the following:
Use a Mediator
When there is a serious problem involving a family business, a professional mediator can help. Bring all the siblings together and work with the mediator to reach a consensus.
The two children of world-famous jeweler Harry Winston fought for decades over Winston’s estate and cost the brothers millions in legal fees, dissipating much of the estate.
When siblings lay claim to the same assets and cannot agree, one option is to sell the assets and split the proceeds.
Defer to an Independent Fiduciary
Siblings can decline an appointment as executor or trustee so that someone else can be the fiduciary and make decisions on asset distributions. If siblings are named as fiduciaries, they need to formally decline the appointment. This step should only be taken if the siblings agree on the appointment of the person who will act as fiduciary—whether this is another person in the family, an attorney, CPA, or a bank’s trust department—and if the estate can afford the payment for this service.
How Siblings Can Divide Household Items
When it comes to distributing household items, here are some ideas:
Using this strategy, each sibling picks a desired item. For example, three sisters, Amy, Beth, and Carol, each have strong ideas about which items they want. To prevent any fights among the sisters, let Amy (the oldest) pick one item, then Beth (the middle child) can make a selection, followed by Carol (the youngest). Continue selections in this order until all of the desired items have been claimed.
Use a Lottery
Write a brief description of each item (e.g., grandmother’s photo in the silver frame) on a slip of paper. Put the slips in a hat, and then siblings can take turns drawing the slips until the hat is empty.
The Bottom Line
Parents usually know whether their children are likely to fight over their inheritance and should take action to prevent conflicts after their death. Whatever a parent decides, review actions from time to time. Feelings among siblings and financial circumstances can change, and plans should be revised accordingly. If steps are not taken before death, you can still use strategies to minimize conflict during the settlement of the estate. Consult with a lawyer to decide the best course of action.