How to liquidate assets after parents’ death is a common problem among siblings. Some families suffer a lot of stress when the time comes to settle the parent’s estate with siblings. There can be some disagreements about who should get what property. In some cases, these disagreements can cause damage to personal relationships.
When your parents leave a Will, most of the big stuff will be taken care of. The house, the vehicles, maybe the savings, stocks or other assets; but what about the rest of the stuff? What should you do with all the personal property, furniture, artworks, and trinkets left?
Sometimes these small, memorable pieces of property are much more sentimentally valuable to the children who are close to their parents than any amount of money would be. Because most of the time they are not accounted for in the Will, deciding who should get what lies on the shoulders of the Executor, who will have to make difficult decisions.
Splitting up personal properties among family members can be more caustic than dividing up financial assets. If you’re the one charged with managing the estate, the best way to keep the peace inside the family is to come up with an objective way to divide the property fairly.
A will is a legal document containing written instructions on how to divide the assets of the testator or the deceased. The will identifies what assets and items are in the estate and transfer of assets after death. It may also allocate specific items to particular heirs. It also has a section assigning the balance of the estate to the heirs in some defined fractions. The testator is not obliged to leave assets to family members. He can leave his assets to anyone by describing bequest in a will. The will often name an executor; this person is in charge of navigating the will through the court-supervised probate process.
The court appoints an executor if there’s no one written on the will. As long as the will was prepared correctly under the laws of the state, the will is valid and it will be enforced by the probate court. Once the will is ruled valid by the court, the executor is selected, and several steps need to be followed. There will be an inventory of assets and outstanding debts. Parties and creditors will be notified. The maintenance of the home will also be arranged until its fate is determined.
Intestate Succession
The term intestate describes a person who has died without having made a will. If the parents’ did not leave a will, or if the will is declared invalid, the property will be left to close family members under state intestacy laws. Laws differ by state, but all set a specific order of inheritance. The computations as to who gets how much depend on the law. In most states, a spouse receives the most significant share, with the deceased children next in line to inherit. The deceased’s siblings and parents follow in the order of priority.
Wills and intestate success laws divide property that goes into probate, but not all assets are included in the probate. When the owner dies, some assets are directly transferred to a named beneficiary, this process bypasses the probate. One example is life insurance. If the deceased named a beneficiary in the burial insurance policy, the payout goes directly to that person. Funds set up as “payable-on-death” automatically go to the person named. The same thing happens to stocks and other securities held in a “transfer-on-death” account.
Real Property and Vehicles
If the deceased owned title to any property, the title dictates who takes it. If there are two or more people on the title with right of survivorship, the property will be divided into equal parts to the surviving co-owners. If there is a transfer-on-death deed, the property or vehicle is automatically transferred to the person named rather than passing through probate. When a family home is involved, a probate court order is needed to sell the house or transfer the deed. In most states, notification of all heirs and other interested parties is required if there is a plan to sell. Selling a home before being granted authority by the court is the biggest mistake an executor can make.
Here are some tips that may be useful on how to liquidate assets after parents’ death:
Before starting the division of personal property, have the siblings write down ten items they want and why they want them. Itemize five things with sentimental value and five things with monetary value. Share the list with everyone. If two siblings wish to get the same item, let them negotiate to know who gets what. They can trade, give up something or if possible, split the item between them. You may be surprised how easy it can be to divide property once the lists are written out.
Take turns to pick
With this system, you can select according to birth order to decide who goes first, either going from youngest to oldest or vice versa, however you determine the order, make sure to change it every round to make it as fair as possible. The person who goes first in the first round needs to go last in the second round. Continue selections in this order until all the desired items have been claimed. Then if the firstborn ends up with the painting that the youngest wanted, they can negotiate between the two of them after all of the selections have been made.
Roll dice or draw straws
Siblings roll dice, with the winner of the first roll receiving the first turn, the winner of the second roll taking the second turn, and so on. The selection order is reversed after the first round. After two rounds, siblings roll the dice again to start a new order. Alternatively, they can draw straws to determine the order of choice.
Use colored stickers or post-it notes
Give each family member a colored sticker or post-it notes, with the color assigned to each one. Get the sibling to place colored labels on the items they want to keep. Any items which only have one colored sticker on will automatically go to that person. However, any items which end up with more than one sticker can be further negotiated later on.
Use a Lottery
Write each item and a brief description of each item on a slip of paper, for example, the mother’s mixing bowl. Put the slips of paper in a box, and then the siblings can take turns drawing the items on the slip of paper until the box is empty.
Draw Numbers
Have the siblings each draw a number, and then have each person start choosing one favorite item.
Hold a Family Estate Pre-Sale
Estate pre-sale is an excellent option if the siblings plan to use an estate sale to clean out the house. Let the estate sale company come in and price all of the items. Then the siblings can go and select the things they want to keep before the scheduled sale to the public. The value of the items they choose will be deducted from their share of the sale proceeds.
Get an Appraisal
If the parents left some items which were highly valuable but not included in the will, it is worth to get the assets valued to make distribution fairer. Bring in an appraiser to provide an objective market value to the higher-end items.
For example, there’s a painting valued at five figures, ask the recipient to pay the amount to the other siblings to compensate. You can have its value deducted from your share of the estate, pay the other siblings for it, or it can be sold and the proceeds divided among them.
Hire a Mediator
Hire a professional mediator or have the parents’ estate attorney to come in and handle the distribution of personal property. Hiring a mediator is the best option to take if the siblings can’t agree on who should get the items on the estate. It will be relatively easy to reach a decision on ownership of items if a third-party is involved. Hiring a mediator can keep the family intact during and after the estate settlement.
Hold a Family Auction
Auction the personal property off. Each sibling can bid on items using tokens such as poker chips or Monopoly bills. Everyone starts off with an equal number of tokens. Then they bid on the items they want. One sister can spend her entire amount claiming the dining set, while a brother might spread his round on smaller items. The balance of the estate items including, furniture, jewelry, electronics, tools, art, books, memorabilia, clothing, and household goods can be fairly divided via a walk through the auction method. This is where each sibling interested in an item expressed their level of interest by bidding on each item.
The executor picks on each item and lets them bid on getting it. The highest bidder wants it the most.
Gather the siblings:
Start in one room with a pen and tally sheet:
• Pick up an item to be auctioned
• Ask if anybody is interested in bidding
• Let the siblings bid and outbid one another until the highest price bid is determined
• Give the item to the winner and write their name, the item and the price bid on the tally sheet.
Pick another item and repeat the process until all items are taken
Everyone attending the auction has an equal chance of acquiring what they like. The winner can bring home the item without any out-of-pocket expense. The executor can sum up what each sibling (brothers and sisters) bid in the auction. The total amount that each sibling bid and owes the estate are added to the liquidated value of the estate that will be distributed amount them. However, in calculating how much the distribution check each one gets, the total bids are subtracted from their distribution check amount.
Can non-heirs be allowed to bid and participate in the auction?
Yes, they can also be allowed to participate in the auction. If a non-heir can outbid the heirs, the heirs should be happy about getting more money on the item. The non-heir should pay the executor on the same day and receive the item after bidding. There’s no need for the non-heirs to wait to get the item on the settle-up day.
Specialist Auctions
If the parents’ have an exclusive collection such as coins, stamps or war medals, it would be worth putting those items in a specialist auction for a collector to buy. Employ a specialist auction service to do the valuation on the collection and help the family to place the items into the right auction.
Copy Photos and Videos
Family photos and videos can be difficult to distribute fairly among the siblings, but it is easy to copy. Copy family photos and videos and have digital images and videos are distributed electronically. You can also have printed photos be copied into high-quality digital hardcopy images. Store the pictures in a flash drive and pass on to the family.
Unwanted Stuff
Any items that are not claimed by the siblings can be identified and set aside to be:
• Sold through an estate sale (with proceeds remaining in the residual estate for distribution)
• Donated to charity (talk to an accountant to see if the donation can have a beneficial tax implication for the estate)
• Craigslisted or put in eBay
• Left at the curb with a free sign
For most families, a combination of these methods is usually appropriate, as there may be a lot of things to sort out from the parents’ home. When trying to settle the estate with siblings, the most important thing is to keep the family together. Dividing the estate fairly can preserve and enhance the family relationship.
Instead of wasting hours talking to different agents answering the same questions over and over again, contact a trusted attorney to do the work for you.
Legal Assistance
Individuals who are considering drafting a trust or a will may wish to consult with an estate planning lawyer. He or she can explain the advantages of using a trust as well as a will. He or she can make recommendations based on the specific considerations of the client. He or she may even recommend using both documents, such as by using a pour-over will that places any property owned at the time of the testator’s death into the trust.
