Dealing with the legalities that come with the passing of a parent can be overwhelming, particularly when dealing with siblings. Sibling inheritance disputes can be challenging issues to navigate during a court proceeding. When siblings are involved, emotions can run high and disagreements can arise, especially if the stakes are like inheriting a house. Or if siblings cannot come to an agreement leading to partition actions. Making an already complicated process even more challenging. In this blog, our probate lawyers will discuss some of the most common issues that siblings face.
If you’re navigating probate with siblings or preparing for the future, this blog aims to help. It offers understanding and insights into handling inheritance disputes and issues with siblings.
Unequal Inheritance: The Potential Issues Created by Parents Giving Property To A Specific Sibling
One common source of sibling inheritance disputes arises when a parent(s) transfer holdings to one sibling while the parent is still living. For example, one of the siblings is inheriting a house while the parents are still alive. The transfer of resources might aim to bypass probate or ensure a larger inheritance for a specific sibling. Or if a sibling receives their inheritance early and a sale of inherited assets takes place. While the parents may have had good intentions, such transfers can create a sense of inequality among siblings and result in inheritance disputes.
In situations where a parent has transferred properties to one sibling while the parent is living, it is essential to examine the legality of the transfer. Reviewing documentation like a gift agreement or trust document is necessary to determine if the transfer occurred under duress or coercion.
It’s not uncommon for siblings to have disagreements over whether an inherited property transfer from a parent to a sibling qualifies as a gift, especially when it is as huge as inheriting a house. Understanding the lawful distinctions between gifts and inheritances is crucial for individuals to make informed decisions about transferring their wealth.
Difference Between Gift and Inheritance
While gifts and inheritances are both types of inherited property transfers, they differ in several ways. A gift is a voluntary transfer of property or assets from one person to another without any expectation of payment or return. The giver of the gift, or donor, must intend to give the gift and the recipient must accept it. Once the gift is given and accepted, it becomes the inherited property of the recipient. In contrast, an inheritance is a transfer of property that occurs after someone’s death. One of the main differences between gifts and inheritances is the timing of the transfer. A gift is voluntarily given during a donor’s lifetime, whereas an inheritance is received after the donor’s death.
Another key difference between gifts and inheritances is the tax implications. Gifts may be subject to a gift tax, which is a tax levied on the transfer of property from one individual to another without receiving any consideration in return. In contrast, inheritances are typically not subject to inheritance tax, although there may be other tax implications, such as capital gains tax.
Understanding the differences between a gift and inheritance is helpful when examining a property transfer from a parent to a sibling. While they may seem similar, the requirements and implications of each can have significant consequences for both the parent conveying an inherited property interest and the sibling who receives the property interest.
When Siblings Disagree: Handling Conflict Over the Appointment of a Personal Representative
A common conflict among siblings is the selection of an executor or trustee. This person is responsible for managing and distributing holdings to the legitimate grantees and heirs. They, as power of attorney holders, enact a will. If a valid Will exists, it likely specifies the parent’s choice of fiduciary.
It’s not unusual for a parent to select a executor who may not have the approval of other family members, specifically siblings. Conflict and resentment among siblings may arise, especially if they perceive the chosen executor as biased or unfit to meet the required standards. In some cases, siblings may contest the appointment of the executor or trustee, leading to a prolonged and complicated process.
When a parent passes away without leaving a Will, it is regarded as an intestate estate. The court will appoint a personal agent to administer the legacy in such cases. State laws where the estate is administered govern the procedure for appointing an executor. Understanding your state’s laws is crucial to ensure the smooth and fair appointment of a personal fiduciary.
When siblings need to elect an executor, open and respectful communication about who to appoint is crucial. They should also consider seeking professional guidance if necessary. Ultimately, it’s in everyone’s best interest to agree and choose which will be the agent with a power of attorney. And work together toward a smooth and fair administration.
Locating All Assets
The Importance of Identifying All The Decedent’s Fortune
As the executor, one of the key responsibilities is to prepare an accurate inventory of the decedent’s properties. The inventory is a crucial part of the process, as it helps to ensure that all of the holdings are accounted for and properly distributed to the heirs. Unfortunately, many make the mistake of not identifying all of the resources, which can result in significant consequences. Below are some of the reasons why failing to identify all is a mistake in the court procedure:
- Mismanagement of Assets: They manage the properties until they distribute them to inheritors. Managing Holdings requires locating all properties. Failure to identify all may lead to overlooking valuable items, undervaluing the properties, and heritors receiving less than their entitlement. This can cause inheritance disputes leading to legal actions against the trustee.
- Tax Consequences: Not identifying all possessions can result in consequences. They must be accurately accounted for and reported for tax purposes. For instance, not reporting an asset like dividend-producing stock to the Internal Revenue Service can lead to underpaid taxes, incurring penalties and interest charges. Such dividends are taxable and must appear on the tax return. Failing to report this income to the IRS can result in penalties.
