Avoid Family Feuds When Distributing Assets
In the days after a person dies, some family members may decide to take matters into their own hands. These individuals may have a key to the home and decide they are going to take items they want. Before the will is even read, furniture, jewelry, artwork and other items may disappear. Cash around the home may be grabbed. In some cases, trash bags of stuff are hauled away.
Family feuds may erupt when other beneficiaries find out items are missing.
In some families, nothing brings out greed and long-time resentments like divvying up sentimental items that remind adult children of their childhoods. The situation can become even worse if it involves divorce, a blended family, or an unmarried couple.
Splitting up material possessions among family members can be more acrimonious than dividing up financial assets. If there are four heirs and a bank account worth $10,000, it’s easy to divide it with each person receiving $2,500. But how do you divide a diamond ring or antique teapot four ways?
Unfortunately, some families wind up incurring large legal expenses over non-titled items that have more sentimental importance than monetary value.
To help avoid this in your family, here are some Q&As about how the executor collects and distributes the assets in an estate.
Q. Exactly how are assets distributed?
A. Here is a brief rundown of the process. After the will is read, the executor must inventory and gather the assets of the estate. Appraisals may be needed for items of value, such as jewelry.
An estate bank account is opened up by the executor, who also obtains a tax ID number. The various accounts of the deceased person are then transferred to the account.
The executor must pay creditors, file tax returns and pay any taxes due. Then, he must collect any money or benefits owed to the decedent. Finally, he or she distributes the remainder in accordance with the will. The executor generally exercises discretion in distributing personal and household items. (Unwanted items must be disposed of or donated to charity.)
Q. How long does it take before assets in a will are given to beneficiaries?
A. Generally, beneficiaries have to wait a certain amount of time, say at least six months. That time is used to allow creditors to come forward and to pay them off with the estate assets. (In some cases, an executor may make partial distributions to the heirs after he or she estimates the debts. However, if the estimates are wrong, the distributions can be called back.)
Q. What happens in the time between when a person dies and the assets are finally distributed?
A. The executor must handle the everyday tasks of the estate to preserve the assets. For example, if there is a home that needs to be sold, the executor must be sure to make mortgage payments, as well as pay insurance premiums and utility bills. (Foreclosure can be started if a few mortgage payments are missed.)
Q. What if a relative has a key to the home and goes in to take items he or she wants?
A. The executor should inventory the assets as soon as possible — before family members get a chance to remove items. If a valuable or important item is taken, and the person responsible refuses to return it, a court can step in to order the item back into the estate.
If the executor knows there are outstanding keys to the decedent’s house, or is concerned about someone coming in without authorization, the locks should be changed.
Q. What happens if the beneficiaries are not satisfied with the way the executor distributes personal items? Or what if the heirs suspect the executor has taken or hidden certain valuable items for himself or herself?
A. The beneficiaries can request an informal accounting of the assets from the executor. If the executor refuses, or the beneficiaries are still not satisfied, they can petition the court for a mandatory accounting. Consult with your attorney about how to proceed.
Q. What can I do to prevent these types of disputes from occurring after I die?
A. There are a number of steps you can take:
- Give away gifts while you are still alive. If there are specific items you want to loved ones, present them now. In other words, get them out of your estate. It can be rewarding to see your prized possessions go to individuals who appreciate them. Depending on the size of your house, you may have thousands of items. Throw away or donate things you no longer need. (A donation to a qualified charity may result in a tax deduction.)
- Make specific bequests in your will or in a letter of intent. If you want your car to go to your daughter or your golf clubs to go to your grandson, put it in writing. Without detailed instructions and guidance, the executor may have to devise an equitable system for distributing your possessions. That can place a large burden on the executor and lead to disputes among your heirs.
- Choose your executor carefully. The executor generally exercises discretion in distributing personal and household items. So it’s important to name a trustworthy person with a fair, impartial, reasonable personality — especially if there are sibling rivalry issues. You want someone who will fulfill your intentions. The right executor can reduce the chance of litigation.
No matter who you name as an executor, the individual will appreciate clear, written instructions.
This article only provides basic answers to some of the questions involved in the distribution of assets. Consult with your estate planning adviser about your situation. By planning ahead, you can avoid battle lines being drawn after your death over possessions accumulated during your life.