Fights over inheritance can cause conflicts in families that are sometimes impossible to heal. Whether what’s at stake is money, property, or just plain old stuff, with a little bit of foresight and planning, some (and maybe all) inheritance battles can be avoided. Here are five strategies to maintain peace within your family.
Strategy #1: Have the talk. Discuss how assets will be distributed. All of us are reluctant to face mortality—our own or that of family members like our parents. Nevertheless, whether you are giving or receiving the assets of an estate, a frank and open discussion of how everything will be divvied up will go a long way to avoiding disputes later. To broach the topic AARP Magazine suggests “to start with something like ‘I am trying to plan my financial future, and it would be helpful to know if you plan on leaving me anything when you are gone.’ You can even put the blame on someone else, saying, ‘My financial adviser told me to ask about a potential inheritance.’”
Strategy #2: Put it in writing. Drawing up a will is the most obvious solution, but one that is ignored way too often. In one survey by Rocket Lawyer, a legal-services website, half of respondents with children did not have a will. Also alarming, 41 percent of baby boomers (ages 55 to 64) did not have one. But a will may not be enough. U.S. News & World Report writes that "a will is a set of instructions listed on a piece of paper that's given to the probate judge. It's a worthless document until probate. The process, which differs from state to state, can take up to a year and requires hiring an attorney. It also leads to fights over assets, upsetting the harmony that many people strive to create when they draft a will. As a general rule, people should use revocable trusts as opposed to a will to avoid probate. [A] trust is a contract that you make to establish an entity into which you transfer title of your assets in your name. In your own trust, you can do anything you want. If you die, the trust doesn't die with you—you appoint a trustee to oversee the trust.”
Strategy #3: Appoint a non-family member as a trustee. Warring factions within a family are not likely to resolve things on their own, especially if there is a sizeable amount of money involved. A family member as a trustee can easily become a lightning rod attracting all the envy and jealousy within the family. Legal website Nolo.com points out that “some parents think that their oldest child should be the executor, even if that child doesn't seem very well suited to the task. But you'll do better to discard any preconceptions about who should be the executor, and instead pick someone who is honest, organized, hardworking, and a good communicator. Inheritors are less likely to become anxious or suspicious if the executor keeps them up to date on what's happening.”
Strategy #4: Avoid the “caregiver curse”. AARP Magazine paints this picture of a common family scenario: “You moved back in with your parents to be their cook/chauffeur/nurse’s aide. In return for this, they’re rewriting their will to leave you the family home. If your siblings learn about this after your parents die, do you think they’ll be pleased? Fat chance. If your parents want to give you the biggest portion of the estate—whether it’s the house or extra cash—get this arrangement out in the open now. While some family members may see your help as a blessing, others may regard you as a mooch who lived rent-free and then grabbed more than your fair share. Ask your parents to communicate this decision while they are alive. Also, [if you are the caregiver] keep track of the hours spent on caregiving and the money used on expenses such as gas and food. Such documentation can help disgruntled siblings understand why you are getting more in the will. Create a formal personal-care agreement that outlines your duties and how you’ll be compensated. Share the agreement with your siblings.”
Strategy #5: Don’t step on “emotional value” landmines. Conventional wisdom is that inheritance fights are usually about money. However, estate planning experts say that in fact, “stuff” (the legal term is "non-titled property like jewelry, heirlooms, and even items with only sentimental value) is often the biggest source of unhappiness among families. The website conversation.com suggests that “if multiple family members hope to get a particular piece of property, it's worth discussing before the inheritance is finalized. While your loved one is alive, they can help mediate the discussion and arrive at a compromise for dividing these assets. People typically respect the wishes of their parents or other elder family members. Their will should also list who receives what piece of property to avoid confusion and disputes.”
If the questions about who gets which stuff are not settled before the family member passes there are a variety of options for distributing non-titled property. Marlene Stum author of Who Gets Grandma's Yellow Pie Plate? Workbook: A Guide to Passing on Personal Possessions offers these ideas:
- “Love it and list it. Ask the kids to itemize 10 things each wants with sentimental value and 10 things with a monetary value. Share everyone's list. If two siblings want the same item, let them negotiate. They can trade or give up something or, if feasible, split the item between them.
- Designate dots. Give each family member a sheet of adhesive dots or Post-it notes, with a color assigned to each relative. Ask them to place a dot on what they want.
- Auction it off. Family members can bid on items using "funny money," such as poker chips or Monopoly bills. Everyone starts off with an equal amount.
- Roll dice or draw straws. Family members roll dice, with the winner of the first roll receiving first choice, the winner of the second roll receiving second choice, and so on. After the first round, the selection order is reversed. After two rounds, family members roll again to start a new order. Alternatively, draw straws to determine order of choice.
- Play birth-order bingo. Select according to birth order, either going from oldest to youngest or vice versa”
No matter what strategies you choose in managing an inheritance, to have the best chance of keeping the peace make sure that the process is transparent, that everyone knows that the rules are being followed, and that everyone gets a voice.
