Sibling disputes often erupt after a parent dies and when it’s time to divide up the assets of an estate. These fights can result in lengthy and expensive legal actions. They can also damage family relationships.
However, a little forethought from parents can prevent such disputes. And siblings can rise to the occasion and employ basic strategies to stop arguments before they start.
Consider the following ideas to avert or resolve conflicts.
Key Takeaways
- Sibling disputes over assets in a parent’s estate can be avoided by taking certain steps before and after the parent dies.
- Parents can express their wishes in a will, set up a trust, use a third party as executor or trustee, and give gifts during their lifetime.
- Parents can gift each child up to $18,000 in 2024 without owing taxes on those gifts.
- After a parent dies, siblings can use a mediator, sell assets and split the proceeds, or defer to an independent executor who is a fiduciary.
- A mediator may be helpful when siblings' emotions are running high.
Estate Planning Steps for Parents
Careful estate planning before death can address many of the issues that might otherwise arise after a parent dies. Perhaps the most important action a parent can take is to have a will that specifies the property that each child shall receive. A parent can spell out who inherits their assets, such as money, a house, a business, valuable artwork, or jewelry.
Will
The specifics of who inherits what can be spelled out in a will. Alternatively, a parent can direct that the house be sold and the proceeds divided evenly among siblings.
If a parent wants to leave one sibling out of the will, this is legally permissible. There is no rule against disinheriting a child. However, to avoid legal challenges by a disinherited child, a parent should consider discussing the matter with the child prior to death or explaining in the will the reason for the action.
Trust
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.
Title
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.
Independent Executor
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.
It is good practice to review and update an estate plan after a major life event, such as the birth of a grandchild.
Parents Can Divide Up Family Items
Disputes over possessions after a parent dies—artwork, books, a watch, sports equipment such as golf clubs, even old furniture—can cause bad feelings within the family which can persist for years. A wise parent who anticipates that siblings may quarrel over household items once they're gone can take specific steps to thwart problems.
Give Gifts During Your Lifetime
A parent may want to disburse certain items before they die so that they can see a child's enjoyment and gratitude. This action can help prevent bickering over the property after the parent dies. For example, a mother who has two daughters might give both of them rings, bracelets, and necklaces, perhaps as birthday or holiday gifts.
Similarly, parents with sufficient financial assets may wish to give gifts of money to their children over a number of years.
Gift tax exclusion: In 2024, the annual gift tax exclusion is $18,000. This means that tax filers can give away up to $18,000 per person without paying tax on those gifts.
Items of greater value require that a gift tax return be filed. This may entail the payment of gift taxes by the parent.
Tag Items
Labeling items sought by children with the names of those who will receive them can be helpful. The label should name the sibling who will inherit the item after the parent dies. While the tag does not represent a legal document indicating that the sibling receive the item, it is indicative of the parent’s intent and may help prevent 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.
Have Siblings Take Turns Choosing Items They'd Like
Using this strategy, each sibling picks a desired item. For example, three siblings, Jude, River, and Charley, have strong feelings about what they want. To prevent any fights among the siblings, let Jude (the oldest) pick one item, and then River (the middle child) can make a selection, followed by Charley (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 that all of your children want (e.g., grandmother’s photo in the silver frame) on a slip of paper. Put the slips in a hat. Then have the siblings take turns drawing the slips until the hat is empty.
The two children of world-famous jeweler Harry Winston fought for decades over Winston’s estate which cost the brothers millions in legal fees, dissipating much of the estate.
What to Do After a Parent Dies
If a parent did not take action before death and there is a possibility of problems concerning the distribution of assets, it’s not too late to preserve sibling harmony or at least to minimize strife.
Use a Mediator
When there is a serious problem involving a family business, a professional mediator can help. Gather all the siblings together and work with the mediator to reach a consensus.
Liquidate Assets
When siblings lay claim to the same assets and cannot agree, one option is to sell the assets and split the proceeds evenly among them.
Defer to an Independent Fiduciary
Siblings can decline their appointment as executor or trustee so that someone else can be the fiduciary and make decisions on asset distributions.
If a sibling is named as the executor, trustee, or personal representative, they need to formally decline the appointment. This step should only be taken if the siblings agree on the appointment ofthe person who will act as executor. This person could be a family member, an attorney, a CPA, or a bank’s trust department. Importantly, the estate must be able to afford to pay for this service.
What Is an Executor?
An executor is an individual or entity appointed by an individual as part of their estate planning efforts. The executor administers the last will and testament of that individual after they die, meaning they carry out the decedent's instructions as stated in the will and tie up their affairs.
What Is a Fiduciary?
A fiduciary is a person (or entity) who carries out duties on behalf of others and is legally and ethically required to place their client's interests before their own.
How Much Money Can a Parent Gift Without Owing Taxes on the Amount?
In 2024, the IRS allows someone to gift up to $18,000 annually to an individual without owing tax on the gifted amount. While the amount per individual is thus limited, the number of people to whom someone might give $18,000 is unlimited.
The Bottom Line
Parents usually know whether their children are likely to fight over their inheritance and should take action while living to prevent conflicts after their death.
Whatever a parent decides, they should review their decisions from time to time. Feelings among siblings and financial circ*mstances can change, and plans should be revised accordingly.
If steps are not taken before a parent's death, you can still use strategies to minimize conflict during the estate settlement. Consult with a lawyer to decide the best course of action. And be sure to write a will yourself so that you maintain control over how your assets are distributed.
