Learn about Familial fair trade and how it works and avoid the Drama.
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Kevin McCormally: I am Kevin McCormally of Kiplinger's and I am here with Jane Clark, the Senior Associate Editor of Kiplinger's Personal Finance magazine, to talk about divvying up an estate.
Jane, sometimes it seems when it's time to split up mom's estate, siblings would rather throw the chime at each other rather than split it up. How do you divvy up an estate without all the drama?
Jane Clark: Well, if you are lucky mom left a letter telling you how to do it, otherwise you all have to commit to the principle of staying fair. Then it's a process of assigning dollar values, coming up with a plan, and being willing to think outside the box.
Kevin McCormally: What do you mean by assigning dollar values?
Jane Clark: You don't have to put a price tag on every last place mat, but you should have an appraiser value the things that are worth something, and most families know what those things are.
Kevin McCormally: Why pay an appraiser if you are not going to try to sell it?
Jane Clark: That's a way of making sure that everyone gets a fair shake. Say you have a silver punch bowl that's worth $2,000 and granddad's brass spittoon worth $700. The person who gets the spittoon can pull more money out of the estate, that keeps things fair.
Kevin McCormally: Okay, but who decides who gets the silver punch bowl in the first place?
Jane Clark: Well, that's where you have to come up with a plan ahead of time, before things start getting ugly. Most families, or many families, just go with the turn taking approach; they draw lots to see who goes first. Then each person goes around the house and chooses one thing. After that go around, you reverse the order and do it again.
Kevin McCormally: That sounds good, but most families have at least a few treasures. Is turn taking really the right way to deal with those?
Jane Clark: Special things do deserve special treatments, and you should make a separate plan for those really special things, like your mother's engagement ring, or the grandfather clock that has been keeping time from generation.
Kevin McCormally: Well, get creative for me.
Jane Clark: Well, for instance, you could do a little play auction using plain money and bid on the clock. The person who wins the auction can pay the estate that amount of money.
Kevin McCormally: So they wouldn't reduce their inheritance by that.
Jane Clark: That's right.
Kevin McCormally: Okay. What if you just can't agree?
Jane Clark: Sooner or later you have to split the baby, and there are plenty of ways to do that. You just have to decide that you are going to keep everything fair and you are going to have everyone go home happy.