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How Should Assets be Distributed Among Family Members?

One issue that everyone faces in estate planning is the distribution of assets and property. Whether you are putting together a plan for your own family or assisting aging relatives, the question comes up of dividing estate assets fairly.

It is very common for a will or trust to have the instruction that all property is to be divided equally among named beneficiaries.  This avoids the problem of having to identify specific property to be granted to heirs, and creating any ill feeling in the family.  It is a fine approach for dividing cash, bank accounts and retirement funds.

But this does place a burden on the trustee or representative to liquidate non-cash property for equal distribution.  In some cases, it might be better to specify non-cash property to be given to select heirs.

Certain assets are easily liquidated, but others such as real property or valuables can either take time to sell, or have some sentimental value for the family.  For that reason, when making an estate plan you should look at these issues:

  • What valuables may have inherent family value? Jewelry, heirlooms, artwork, autos and other items might have sentimental family value, or cannot be sold for real market value.
  • Can real property be managed or leased for the benefit of all heirs? Instead of selling real property, it is possible the asset could be held and managed in trust, and proceeds distributed to heirs periodically.
  • Are there any tax consequences in liquidating certain assets? Some assets can carry taxable gains which might be incurred when liquidated.

Are their assets that some heirs might prefer to receive, even if it means a lower valued share of the estate? This is one way to handle family preferences, and if an heir expresses interest in an asset then that could be specifically given in the estate plan. (There is no rule that says assets have to be distributed equally, but this should be approached carefully to avoid an heir contesting distribution.)

These questions can be part of a family discussion, which might reveal preferences among the heirs to the estate.  It is also a good idea to consult with a tax advisor and estate planning attorney to avoid unnecessary delays or tax consequences.

Written by Andrea Shoup

Shoup Legal, A Professional Law Corporation can be reached at (951) 445-4114.

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