Ways to Limit Squabbles When Settling an Estate
Over my many years of assisting executors and family members deal with settling the estates of loved ones, I’ve noticed an odd phenomenon: Often there are no squabbles regarding assets having high financial value, but in family after family there are ugly fights over who receives certain personal effects having little or no financial value but great sentimental value.
Recently I put together the following thoughts on this topic (in the form of a hypothetical family situation) that you may find helpful:
Distributing Personal Effects from a Decedent’s Estate
When Mrs. Smith died and her personal effects were being divided up between her children, a previously happy family suddenly found itself in turmoil.
Mrs. Smith’s Will left her personal effects in equal shares to her three children. It soon became obvious that her daughter Suzie desperately wanted the antique coffee table (appraised at $500), her son Jack desperately wanted the toaster oven (appraised at $10), and her son Johnny desperately wanted both the antique coffee table and the toaster oven. Each child had lesser, but still quite strong, attachments with respect to other items of furniture and furnishings. And of course each child wanted all of the cherished family photos. To make matters worse, various grandchildren and other relatives and friends expected or at least wanted to be given some personal item of Mrs. Smith’s as a remembrance of her.
The Executor of Mrs. Smith’s estate, long-time family friend Fred, didn’t expect such turmoil but he knew two things for sure. First, he knew that Mrs. Smith’s Will gave him ultimate authority to divide and distribute the personal effects among the three children in any reasonable manner he might choose. And, more importantly, he knew that Mrs. Smith’s dying wish was for her family to live in harmony with each other.
If you were Fred what would you do?
There are probably as many ways to approach this issue as there are people with imagination. Below I will describe some of the more common approaches and attempt to point out some of the advantages and disadvantages of each approach. As will become clear to the reader, however, there is no single, best, one-size-fits-all approach; there is no “magic wand” that can be waved over a house filled with belongings to make everyone happy about the disposition of those belongings.
Approach Number 1: Executor Asserts Ultimate Authority
Most Wills (and, in some instances, applicable state laws) give the Executor the power to distribute personal effects in any manner reasonably consistent with the testator’s intentions as expressed in the Will. Where, as is often the case, the Will states that the personal effects are to be distributed in equal shares among several persons, courts often conclude that the intention was that the shares be of approximately equal monetary (not necessarily sentimental) value.
So sometimes an Executor will sort of “take the bull by the horns” and simply divide up the personal effects (usually in consultation with a personal property appraiser) into the necessary number of shares, with each share having roughly the same monetary value, and then arbitrarily (more or less) assign a share to each beneficiary. Most executors would try to allocate at least some sentimental items to each “share” so that one child doesn’t end up with all of the sentimental items.
If Fred (in the example above) were to use this first approach Suzie may or may not end up receiving the antique table, Jack may or may not end up receiving the toaster oven, etc. In fact, it is possible that none of the children receive much of anything they really wanted.
But that doesn’t necessarily have to be the end of the story. Once Fred has made the distribution so that each child owns his or her share, there is nothing to prevent the children from “bargaining” with each other. For example, if Jack ended up with the antique table then he may choose to sell it to Suzie for whatever price they can agree upon (or, being the sweet brother that he is, he may just give it to Suzie). And if Johnny steps in and starts whining before the transaction between Suzie and Jack is complete, Jack might simply choose to sell the antique table to whichever of his two siblings is willing to pay him the most for it.
From the Executor’s standpoint this first approach has the advantage of being fairly quick. And it allows him to avoid having to hear heart-wrenching pleas from each child regarding how “Mom always wanted me to have that toaster oven” or how “Mom promised me she’d leave that antique table to me when she died”.
From the children’s standpoint this first approach has the advantage of being fairly quick; it allows each of them to “get on with life” without a long, drawn-out battle with siblings over relatively insignificant (at least monetarily) assets of the estate.
An obvious disadvantage to this first approach, from the Executor’s perspective, is the risk that one (or more) of the children might sue the Executor claiming that the shares were not equal in value, or that the Executor colluded with another child, or that the testator’s intent was for the personal effects to be divided and distributed in approximately equal shares based on sentimental (not monetary) value, etc.
An obvious disadvantage to this first approach, from a child’s perspective, is that the share assigned to him or her by the Executor might not include the item he or she most desired, and the risk that the sibling who received that item might be unwilling to give away or sell it.
Approach Number 2: Pick a Card – Regular Method
Under this approach the Executor coordinates a “drawing” or a “dice rolling” or some other game of chance among the children so that each child is placed, by lot, within an order of priority. Using the above example, let’s assume that Fred has Suzie, Jack and Johnny each roll a pair of dice (preferably all in each other’s presence) knowing that the person rolling the highest number would have the first pick of the personal effects. Let’s further assume that Suzie rolled a three, Jack rolled an eight, and Johnny rolled a five. At that point Fred would announce that Jack would have first pick, Johnny would have second pick, and Suzie would have third pick.
Then all four of them (Fred, Jack, Johnny and Suzie) would walk through Mrs. Smith’s house and each child would, in turn, pick out individual items he or she desires. Fred (or his assistants) would immediately mark each item selected (or perhaps move the selected items into piles or corners of a room, with each such pile or corner being designated as belonging to a particular child). This process would continue until all items in the house had been selected (or, as more often happens, until there remain in the house only those items that none of the children desire).
An advantage to this approach is its perceived “fairness” – the order of selection is determined by the “luck of the draw”. A disadvantage is the likelihood that none of the children will receive everything he or she desires. (But of course, as in the first approach described above, there is nothing to prevent the children from bargaining with each other after the selection process has been completed).
Perhaps the biggest practical disadvantage of this second approach is that it normally takes a very long time for an Executor and children to go through an entire house selecting, in turn, literally thousands of items. (A related problem or disadvantage is that there may be some controversy regarding what is or is not a single item; for example, is each eating utensil a single item or is the tableware, in the aggregate, to be considered a single item? If this approach is used it would be helpful if everyone could agree ahead of time that the Executor’s decision on all questions such as that will be final.)
Approach Number 2(A): Pick a Card — Speedy Method
To speed up the regular “pick a card” approach (approach number 2 above), the Executor might spend a few hours (or, more likely, a few days) going through the house, again perhaps with the assistance of a personal property appraiser, carefully “bundling” various items into “piles”. Then, when the children are making (in turn, by lot) their selections they are selecting “piles” or “bundles” of items rather than single items.
If this approach is used the Executor has many options regarding how to bundle the items. He may wish to randomly distribute, among the various piles, the sentimental items so that not all of those items end up in a single pile. He may wish to include different types of items in each pile so that every pile contains, for example, a few kitchen items, a few photos, a piece or two of living room furniture, a few articles of clothing, etc. He may wish to bundle the items by usage or by logical groupings, such as having one pile be all the dining room furniture (perhaps plus other items in order to equalize values), another pile be all the living room furniture (perhaps plus other items in order to equalize values), one pile be all the silverware (perhaps plus other items in order to equalize values), one pile be all the jewelry (perhaps plus other items in order to equalize values), etc.
As noted above, the assistance of a personal property appraiser in this bundling process would be very helpful in order to assure that each pile has approximately the same monetary value as each other pile. Similarly, the Executor would be wise to make sure that he bundles the items up into a number of piles that is evenly divisible by the number of children, so that each child ends up receiving the same number of piles as each other child.
Approach Number 2(B): Pick a Card – Regular or Speedy Method (Reversing Selection)
This approach can (and probably should) be used in connection with either approach 2 or approach 2(A) above, and is an improvement upon those methods based upon, of all things, statistics. While it may not be readily apparent, if (in our example above) Jack picks first and then Suzie picks and then Johnny picks, and then Jack picks and then Suzie picks and then Johnny picks, and on and on, statistically speaking Suzie has an advantage over Johnny and Jack has an advantage over both Suzie and Johnny.
Instead it is more fair (statistically speaking) for the order of selection to be reversed each round. To see this more clearly, let’s assume that the order of selection is not reversed each round and there are 12 items to be selected with Jack, Suzie and Johnny all in agreement that item 12 is the most desirable (let’s say it’s worth $12), item 11 is second most desirable (let’s say it is worth $11), etc. With that method, Jack would have the opportunity to select more desirable items that Suzie or Johnny simply because the order of selection stayed unchanged from round to round.
If you reversed the order each round then the value for each person would be the same. No one would have an advantage.
Approach Number 3: Sale
This approach is normally applicable only when all the parties agree to it. If the Will directs the Executor to distribute the personal effects to the children (instead of directing the Executor to sell the personal effects) then this approach should not be used unless – and only to the extent that – all the children agree to use it. And I strongly recommend that any such agreement be in writing.
This approach can be used either with respect to all the personal effects or only with respect to some of the personal effects. Often it is used to deal with the less desirable effects remaining after the more desirable personal effects have been distributed using one of the approaches described above.
Under this approach, the Executor simply arranges for the applicable personal effects to be sold, with the net sales proceeds then distributed in equal shares among the children. But of course there are numerous ways to conduct such a sale.
Sell everything as a single bundle to the highest bidder (with children who wish to bid being treated just the same as strangers who wish to bid) after appropriate advertising and after establishing/publishing the “rules” applicable to the sale. Often it is wise for the Executor to advertise the sale to antique dealers and similar persons who may be interested in buying an entire house full of personal effects.
Hire an auction company to sell the personal effects piece by piece or bundle by bundle (in the discretion of the auction company) to the highest bidders (with children who wish to bid being treated just the same as strangers who wish to bid). Usually such an auction would be conducted “on site” but sometimes the personal effects are trucked away to a warehouse or similar location for sale there.
Executor prices each item (or each bundle of items), usually with the assistance of a personal property appraiser, and then (after advertising) conducts his own “estate sale” based on whatever rules he establishes/publishes before the sale (with children who wish to bid being treated just the same as strangers who wish to bid).
Note that any sale create sale creates the risk that a disappointed child (or, for that matter, a disappointed stranger) might sue the Executor claiming that the “rules” established for the sale or auction were not properly followed, or that someone else (usually another child) was allowed to purchase an item for a discounted amount, etc.
About Photographs
In my experience, almost every child always wants almost every photograph. Sometimes an Executor will try to distribute to each child those photos containing that child’s image. But this sometimes results in one child receiving many more photos than the other children. And often there are so many group photos of the entire family, or of several children that it becomes impractical to divide up the photos base on whose image appears on each photo.
A better practice is for the Executor to make (at the estate’s expense) high quality copies of the photos so that each child can receive at least a copy of every photo.
Conclusion
Fred has a difficult job. Over the several decades during which I have practiced law almost exclusively in the area of trusts and estates, I have noticed that children rarely “pick fights” with each other over the hundred thousand dollar certificate of deposit or over the million dollar stock; instead they pick fights with each other over the $10 toaster oven and the $500 antique table.
Often those fights have nothing to do with the items themselves; instead a fight between siblings over personal effects is often (in the words of a lawyer friend of mine) a “battle over ancient aggression.”
What my lawyer friend was saying is that (using the example above) Jack may desperately want the toaster oven not because it has any intrinsic value to him, but instead, because he has some hazy memory of mom – perhaps 50 or 60 years ago – making delicious cinnamon toast in that oven for Johnny on Johnny’s birthday but having time to make only “plain” toast for him (Jack) on his birthday a few months later and (consciously or subconsciously) Jack wants to exact some measure of revenge upon Johnny by preventing him from receiving the toaster oven upon Mrs. Smith’s death.
Hopefully Fred can find a way to distribute Mrs. Smith’s personal effects by using an approach – perhaps one or more described above – that will honor Mrs. Smith’s desire that her family live in harmony with one another and that will allow Fred to remain a longtime family friend.
And hopefully Suzie, Jack and Johnny will be gracious enough to allow Fred some flexibility and discretion in various decisions he must make in carrying out his difficult job.
As you deal with issues such as these let me know how I can assist you.