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Valuing estate assets key to resolving family disputes

Some of our Twin Cities readers may unfortunately have experienced the type of disagreements that can arise among siblings over the distribution of parents' estate assets. Both testators and estate planning professionals often do their best to draft estate plans that provide clear direction and avoid conflicts, but even well considered plans sometimes leave room for probate disputes.

For one family of sisters, their parents' trust arrangement may force them to give serious thought to the financial costs of pursuing their different wishes for the family's real estate.

In this case, the parents established a living trust that provides for all trust assets to be divided equally among their three daughters. As the appointed trustee, the middle sister wants to sell the house and divide up the proceeds. The older and younger sisters, however, want to keep the house and rent it out. The two sisters are willing to buy out the share of the trustee, but fluctuations in the real estate market have raised questions as to the value of the estate.

This case illustrates a situation in which communication is critical. As trustee, the middle sister is under no obligation to seek the consent of the other two sisters before disposing of estate assets. The trustee has an obligation to manage assets in the best interest of beneficiaries and not favor or disfavor any beneficiary, but she has final say as to whether the house is sold or bought out of the trust.

While the sisters may ultimately be able to agree to a purchase of the trustee's interest, the more challenging point may be agreeing upon a fair purchase value for her one-third share. When it comes to technical details like determining fair market value, all the negotiation in the world may not be enough to reach an agreement of mutual trust.

Families facing issues like the sisters in this case may benefit from consulting with an estate valuation professional in order to make sure that negotiations proceed from a foundation of realistic expectations.

Source: Sacramento Bee, "Can we buy out our sister's share of Mom and Dad's house?" Kay Brooks, Oct. 9, 2012

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