Tips to Help Siblings Resolve an Estate Battle

Sibling rivalry and fears that mom liked one child best are often played out after a parent dies and it’s time to divide up the assets in a parent’s estate. Disputes over a treasured but valueless picture can cause bad feelings within the family, and those bad feelings can persist for a long time. Sibling disputes can result in lengthy and expensive legal actions. For example, 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. These disputes can be avoided by a little forethought from the parent, or they can be addressed by siblings using savvy strategies after the parent dies.

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 gets what property. Who inherits the house? A business? A valuable painting? This 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 bar on disinheriting a child. However, to avoid legal challenges by a disinherited sibling, consider discussing the matter with the child or explaining the reason in the will.

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).

Put property in the joint name of a parent and child so that the asset passes automatically to the child when the parent dies. This can be done, for example, for a bank account, brokerage account or realty.

Use a non-sibling executor or trustee. A third party who does not stand to gain from any decisions regarding property distributions may be a good idea, especially if a parent believes there could be sibling disputes after he or she dies.

A wise parent who anticipates that siblings may quibble over household or other minor items after he or she dies can take certain steps to thwart any problems:

• Gifts during life. A parent may want to disburse certain items before he or she dies 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, she can give rings, bracelets and necklaces to each, perhaps as birthday or holiday gifts. This gifting strategy assumes that the value of items is below the annual gift tax exclusion ($14,000 per recipient in 2016). Items of greater value require that a gift tax return be filed and may entail gift taxes.
• Tagging items. 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 get the item, it is indicative of the parent’s intent and may go a long way in avoiding sibling spats.
• Letter of instruction. This is a letter 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 his or her property. (See Letter Of Instruction - Don't Leave Life Without It.)

If a parent did not take action before death, and there’s a possibility of problems over distributing assets, it’s not too late to preserve sibling harmony (or at least minimize bad feelings).

• Use a mediator. When there is a serious problem involving a family business, you may want to use a professional mediator. Bring all the siblings together and work with the mediator to reach consensus.
• Liquidate assets. When siblings lay claim to the same assets, and you can’t work things out, consider selling the assets and splitting 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 about asset distributions. If siblings are named as fiduciaries, they need to formally decline appointment. This should only be done 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 or CPA, or a bank’s trust department – and if the estate can afford the payment for this service.

When it comes to distributing household items, here are some ideas:

• Take turns. Using this strategy means that 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 and then Carol (the youngest) makes her choice. Continue selections in this order until all of the desired items have been claimed.
• Use a lottery. Write a brief description of each item on a slip of paper (e.g., grandmother’s photo in the silver frame). Put the slips in a hat and then siblings can take turns drawing the slips until the hat is empty.

Parents usually know whether their children are likely to fight over their inheritances and should take action to prevent potential 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. But if actions aren’t 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.

See also Avoiding 4 Common Causes of Family Estate Fights.