Help Dad do estate planning math and make adjustments

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Post Reply
Topic Author
ConfusedGrandpop
Posts: 4
Joined: Sun Oct 27, 2019 11:10 pm

Help Dad do estate planning math and make adjustments

Post by ConfusedGrandpop » Sun Oct 27, 2019 11:25 pm

Dad is a great artist but never spent much time in finance or math class and needs your help.

Mom and Dad were married for 60 years with three grown daughters. Mom, just before she passed away last year, gave Daughter #1 real estate worth $220,000 debt-free at today’s fair market value. The other daughters received nothing, and this caused a family feud. Dad now wants to give his other two daughters, Daughters #2 and #3, similarly valued cash gifts so there can be peace in the family, assuming Dad can afford to do so.

Daughter #1 does many calculations for Dad, and she insists that Daughters #2 and #3 should receive FROM DAD ⅓ of her gift’s value (or $73,333 each) to make things even.

Dad wants to know if Daughter #1’s math is correct. If not, what amount must DAD give to each daughter so that each has received an equal gift?

Daughter #1 also claims that Daughters #2 and #3 must receive the last year's value of the real estate when it was transferred, not this year’s current higher value when Dad makes his payout. Do you agree? Why or why not?

Daughter #1 explains her math in the below email. Can you explain how her argument below proves the correctness of her calculation to make the three sisters equal. Dad doesn’t understand the email, and he would appreciate everyone's help so that he obtains the correct answers.

______________________________

Email from daughter #1 explaining why she is correct:
“...To make things simple, let's say that dad has $100 dollars to leave all of us for inheritance. While he is living, he is offering you and [Sister #3] $25 to make things equal, which means that today you each will get $12.50 (half of $25). When you deduct the $25 from his $100, there is now $75 remaining for inheritance. Much later on (many, many years from now) when the time comes for us to divide the remaining money, that $75 would get divided three ways giving each of us $25. By doing it this way, in the end, I would receive $25, you would receive the original $12.50 plus $25 for a total of $37.50. [Sister #3] would also receive $37.50. (37.50 + 37.50 + 25 = 100) I hope this helps clarify things a little better than what you are presently thinking regarding his offer. I am only trying to help and present the facts clearly.”

356Fan
Posts: 9
Joined: Wed Sep 12, 2018 6:37 am

Re: Help Dad do estate planning math and make adjustments

Post by 356Fan » Mon Oct 28, 2019 6:24 am

That is some "creative" - and self-serving - math being performed by daughter #1.

To make things equal, Dad should gift each daughter the same dollar value - either via the property or cash. So, assuming he can afford it, he should gift daughters #2 and #3 the same dollar amount - $220K.

In terms of the whether to adjust the $220K upwards to account for the year that has passed since he gifted daughter #1 the property, I think the issue is a little more gray, but I lean toward doing so. Daughter #1 has had the benefit of the time-value of money during her year and the daughters have not. Granted she may have incurred (?) some costs/risks by owning the property the others daughters did not over the past year, but again, if the intent is to make daughters #2 and #3 whole, I think adjusting their $220K upwards makes sense. You could either adjust it upwards by an inflationary adjustment (~2%) or an independent estimate of the raise in property values over the last year. The inflation adjustment is simplest as their may be contention on the updated value of the property.

I'm not sure I followed daughter #1's math in her quoted message, but at a minimum it seems to ignore the time value of receiving her inheritance "many, many years" before the daughters would receive theirs. Additionally, the value of inheritance left to divide at the time of Dad's passing may not allow equal division and will certainly involve lots of assumptions about investment growth.

Jack FFR1846
Posts: 10313
Joined: Tue Dec 31, 2013 7:05 am
Location: 26 miles, 385 yards west of Copley Square

Re: Help Dad do estate planning math and make adjustments

Post by Jack FFR1846 » Mon Oct 28, 2019 6:37 am

Dad should decided what he wants to do. He doesn't need a calculator. The answer here could be zero or donations to the local zoo. Nobody is entitled to inheritance.
Bogle: Smart Beta is stupid

HomeStretch
Posts: 2503
Joined: Thu Dec 27, 2018 3:06 pm

Re: Help Dad do estate planning math and make adjustments

Post by HomeStretch » Mon Oct 28, 2019 7:04 am

Agree new gifts of $220k each would be equal (based on fair market value). But a new gift of cash is likely more valuable when tax effected than the property gift for which daughter #1 has mother’s cost basis and will pay tax on any realized gains in the future.

Sounds like making new gifts probably isn’t going to restore peace to the family (most importantly Dad).

User avatar
MillennialFinance19
Posts: 150
Joined: Sat Feb 09, 2019 11:06 am

Re: Help Dad do estate planning math and make adjustments

Post by MillennialFinance19 » Mon Oct 28, 2019 7:36 am

Sounds like daughter #1 wishes she had the cash option instead of the RE, and is trying to be sure she comes out on top. Just my $.02.

Edit: let’s make an assumption using her math - his portfolio is $1m. In this scenario, Daughters 2 and 3 would receive $375k each and counting the RE, Daughter 1 would have $470k. This is distorted, because we have no idea the actual value of the $220k in relation to the estate.

Long story short, she probably KNOWS this math works for her.
Last edited by MillennialFinance19 on Mon Oct 28, 2019 7:46 am, edited 1 time in total.

gorow
Posts: 38
Joined: Sat Mar 19, 2016 9:54 am

Re: Help Dad do estate planning math and make adjustments

Post by gorow » Mon Oct 28, 2019 7:44 am

Perhaps Daughter #1 is the one who could solve this by selling the real estate and splitting the proceeds three ways. Then Dad doesn't carry the guilt over the percieved need to make things even.
Last edited by gorow on Mon Oct 28, 2019 7:44 am, edited 1 time in total.
Retired 1/1/2019. Not concerned about sequence of returns because two years here taught me what I need to know.

User avatar
bengal22
Posts: 1828
Joined: Sat Dec 03, 2011 6:20 pm
Location: Ohio

Re: Help Dad do estate planning math and make adjustments

Post by bengal22 » Mon Oct 28, 2019 7:44 am

If Dad wants to bequeath equally he should gift at value of real estate given to #1. At the time he gifted it to her. E mail makes no sense to me.
"Earn All You Can; Give All You Can; Save All You Can." .... John Wesley

goblue100
Posts: 989
Joined: Sun Dec 01, 2013 10:31 am

Re: Help Dad do estate planning math and make adjustments

Post by goblue100 » Mon Oct 28, 2019 7:53 am

gorow wrote:
Mon Oct 28, 2019 7:44 am
Perhaps Daughter #1 is the one who could solve this by selling the real estate and splitting the proceeds three ways. Then Dad doesn't carry the guilt over the percieved need to make things even.
I started to suggest this, but why should daughter 1 go against Moms wishes? I suspect there are some spoiled kids in this mix, but which ones it is I'm not sure. And it doesn't address the basic question of how Dad can make this equal. It seems to me that the only to make it "fair" is for everyone to get $220K now, and then pick over the bones of Dads estate in equal thirds when that time comes.
Financial planners are savers. They want us to be 95 percent confident we can finance a 30-year retirement even though there is an 82 percent probability of being dead by then. - Scott Burns

Broken Man 1999
Posts: 3297
Joined: Wed Apr 08, 2015 11:31 am

Re: Help Dad do estate planning math and make adjustments

Post by Broken Man 1999 » Mon Oct 28, 2019 7:58 am

bengal22 wrote:
Mon Oct 28, 2019 7:44 am
If Dad wants to bequeath equally he should gift at value of real estate given to #1. At the time he gifted it to her. E mail makes no sense to me.
Dad didn't gift the real estate, Mom did.

Broken Man 1999
“If I cannot drink Bourbon and smoke cigars in Heaven than I shall not go. " -Mark Twain

camden
Posts: 267
Joined: Sun Sep 27, 2009 12:22 pm

Re: Help Dad do estate planning math and make adjustments

Post by camden » Mon Oct 28, 2019 8:14 am

“Art thou envious because I am generous?”

Between the math of daughter #1 and the creation of a “family feud” by daughters #2 and 3 over the original gift, I’d consider myself fortunate if I did not have to interact with any of the trio.

dbr
Posts: 30542
Joined: Sun Mar 04, 2007 9:50 am

Re: Help Dad do estate planning math and make adjustments

Post by dbr » Mon Oct 28, 2019 8:19 am

At least he doesn't understand the e-mail, which means he is still thinking clearly. The error is not in doing the arithmetic but in trying to claim that an outcome that is patent nonsense would somehow be fair.

If you want to address the math, a first statement to question is the contention that you make up for giving one person $25 by giving two people $25 or $12.50 each. It should be $25 each. The argument also ignores that the original estate was $125 from which the first daughter already has $25. If you finish the proposed math the first daughter ends up with $50 and the two other sisters with $37.50 each. The statement that it must be right because the total disbursed at inheritance adds up is necessary but is not a proof of equal shares. I teach a bit of math to kids here and there, and also even to adults sometimes, and this argument sounds to me less like someone trying to be sneaky than like someone who is just unable to reason quantitatively.

PS The error of viewing the two other daughters as one "entity" who must split everything would appear to the amateur psychoanalyst as some kind of me-them egotistical fantasy.
Last edited by dbr on Mon Oct 28, 2019 8:48 am, edited 1 time in total.

User avatar
RickBoglehead
Posts: 4478
Joined: Wed Feb 14, 2018 9:10 am
Location: In a house

Re: Help Dad do estate planning math and make adjustments

Post by RickBoglehead » Mon Oct 28, 2019 8:31 am

Mom's intent has nothing to do with Dad (since she did it apparently on her own), nor nothing to do with inheritance, and in fact may have been a bad financial move for daughter #1, but that's daughter #1's problem.

Dad should live his life, and give his 3 daughter's equal shares when he passes, IMO.

Daughter #1 doesn't know how to do math. If she got $220,000 worth of land at today's value, then her sisters should receive the same value. Why would they get anything less?
Avid user of forums on variety of interests-financial, home brewing, F-150, PHEV, home repair, etc. Enjoy learning & passing on knowledge. It's PRINCIPAL, not PRINCIPLE. I ADVISE you to seek ADVICE.

HomeStretch
Posts: 2503
Joined: Thu Dec 27, 2018 3:06 pm

Re: Help Dad do estate planning math and make adjustments

Post by HomeStretch » Mon Oct 28, 2019 8:39 am

OP, it’s not clear if you are asking as a friend of the Dad or the daughters. If you are Dad’s friend, be sure his desire to restore family peace won’t impoverish him or isn’t the result of being bullied/financially abused by his daughters. And Dad should not be surprised if gifts now to Daughters 2 and 3 don’t resolve the family disharmony.

TheDDC
Posts: 456
Joined: Mon Jan 08, 2018 11:11 am

Re: Help Dad do estate planning math and make adjustments

Post by TheDDC » Mon Oct 28, 2019 9:07 am

camden wrote:
Mon Oct 28, 2019 8:14 am
“Art thou envious because I am generous?”

Between the math of daughter #1 and the creation of a “family feud” by daughters #2 and 3 over the original gift, I’d consider myself fortunate if I did not have to interact with any of the trio.
My thoughts as well. Perhaps the creation of "generational wealth" in this particular instance should be better crafted to bypass the current generation of grifters in the family?

-TheDDC
Refreshingly, a double barrel shotgun blast of truth...

ChrisC
Posts: 836
Joined: Tue Jun 19, 2012 9:10 am
Location: North Carolina

Re: Help Dad do estate planning math and make adjustments

Post by ChrisC » Mon Oct 28, 2019 9:23 am

Daughter #1's explanation is difficult to understand and it seems it is searching for a logical reason to justify a patently unfair distribution from one parent -- at least it seems unfair from the standpoint of the father who appears to want to make things right. Nonetheless, I'd tread very carefully here -- despite the obvious self-serving calculations and logic pondered by Daughter #1. Under the circumstances, with one now deceased parent favoring one child and the other parent wanting to correct this, we should not "over-correct" and leave everyone with festering long term issues over a division of legacy wealth. Daughter #1 does have a point -- though her calculations in trying to equalize things are puzzling.

Daughter #1 receipt of real estate does have tax consequences. One should calculate what the "after tax" affect of this gift is to Daughter #1. For example, if she didn't receive a stepped-up basis in the real estate gift from her mom, then the value of her gift is not really $220K when one adds future capital gains tax liability. If Daughter #1 were to sell the real estate today, perhaps her income from the sale, taking into account her tax liability, might be modest. It would seem to me that any "equalization" of transfers should take into account the tax hit that Daughter #1 would incur.

If I were Daughters #2 and #3, I'd try to convince the family to refer this matter to a neutral third party, like an accountant, to make appropriate calculations and recommend a course of action, with "equalization" being the cornerstone for any calculations and recommendations. This would remove it from the emotional angst that the family currently has over this situation and people can deflect blame to someone else, other than Mom and Dad or Daughter #1.

User avatar
Steelersfan
Posts: 3725
Joined: Thu Jun 19, 2008 8:47 pm

Re: Help Dad do estate planning math and make adjustments

Post by Steelersfan » Mon Oct 28, 2019 9:30 am

What we don't know: was the real estate separate property acquired by the wife by gift or inheritance, or was it marital property jointly owned by both parents. Did daughter number one have a special relationship with the mother and provide care for her that the other two daughters did not?

That might change the math, although I agree the email is very confusing.

retired@50
Posts: 394
Joined: Tue Oct 01, 2019 2:36 pm

Re: Help Dad do estate planning math and make adjustments

Post by retired@50 » Mon Oct 28, 2019 10:00 am

I agree that D1 has some math challenges which make the email confusing. I would think the 220K figure to the other daughters sounds about right on the surface. One question that remains open in my mind is "What is this real estate?". In other words, is it vacant land, a house, a barn? This makes a huge difference if you're trying to inflate the value of it for the period since it was gifted.

If it's vacant land with no obvious purpose, it mainly represents a tax bill for the owner, and a tiny hope of future appreciation.

If it's a delightful 3 bedroom, 2 bath house, then D1 might be living in it rent / mortgage free, enjoying a lower cost of living.

If it's an occupied rental property with tenants paying rent each month, it is an income stream to D1.

The answer to this question matters greatly in my mind... Regards,
Last edited by retired@50 on Mon Oct 28, 2019 10:09 am, edited 1 time in total.

User avatar
bengal22
Posts: 1828
Joined: Sat Dec 03, 2011 6:20 pm
Location: Ohio

Re: Help Dad do estate planning math and make adjustments

Post by bengal22 » Mon Oct 28, 2019 10:05 am

Broken Man 1999 wrote:
Mon Oct 28, 2019 7:58 am
bengal22 wrote:
Mon Oct 28, 2019 7:44 am
If Dad wants to bequeath equally he should gift at value of real estate given to #1. At the time he gifted it to her. E mail makes no sense to me.
Dad didn't gift the real estate, Mom did.

Broken Man 1999
I did not say Dad did. If he wants to bequeath equally to all 3 children he should bequeath 2 or 3 the value of #1 real estate gift. That's all I am saying. It is his choice.
"Earn All You Can; Give All You Can; Save All You Can." .... John Wesley

delamer
Posts: 9057
Joined: Tue Feb 08, 2011 6:13 pm

Re: Help Dad do estate planning math and make adjustments

Post by delamer » Mon Oct 28, 2019 10:13 am

Determine the cost basis for the real estate.

Subtract the cost basis from the current value. This is the amount on which taxes will be paid if sold today.

Determine the actual taxes that would be owed by Daughter #1 if the property was sold. Also determine any selling costs (broker fees, etc.) for the sale.

Subtract (taxes plus selling costs) from current value to get “net value.”

Dad gifts cash in the amount of “net value” to each of the other 2 sisters today.

Upon dad’s death, remaining estate is split 3 ways.

(The mother must have been a real piece of work.)

clydewolf
Posts: 745
Joined: Tue Jul 21, 2015 12:51 pm

Re: Help Dad do estate planning math and make adjustments

Post by clydewolf » Mon Oct 28, 2019 10:35 am

When willing physical assets it is impossible to distribute the assets equally. People's likes/desires needs are not the same.

Why did Mom will the real estate to daughter #1? Is it possible that the real estate is also daughter's home that was being rented from Mom? But then does the rent that was paid over the years enter into the distribution equation?

This feud will never be evened out.

Dad can try, the best way is to see that #2 and #3 each get $220,000 today.

Topic Author
ConfusedGrandpop
Posts: 4
Joined: Sun Oct 27, 2019 11:10 pm

Re: Help Dad do estate planning math and make adjustments

Post by ConfusedGrandpop » Mon Oct 28, 2019 11:10 am

Thank you so much for your many continued, kind and well-considered responses.

The real estate is a share of a beach house.

My understanding is that the cost basis is an inheritance and thus is entitled to stepped-up basis at its value when Mom passed away in 2018. I do not believe a formal appraisal was received at the time, but it can be estimated and there is an accountant involved.
Last edited by ConfusedGrandpop on Mon Oct 28, 2019 11:54 am, edited 1 time in total.

Topic Author
ConfusedGrandpop
Posts: 4
Joined: Sun Oct 27, 2019 11:10 pm

Re: Help Dad do estate planning math and make adjustments

Post by ConfusedGrandpop » Mon Oct 28, 2019 11:23 am

I tried to avoid the drama, as it doesn't look good for anyone or help to achieve the solution, but here are some additional facts if they help shed light on the matter:

The feud itself has more to do with how the gift was made, and a longstanding implicit trust that was broken by Sister #1's actions to accomplish the gift when she took her parents to a law office during her Mom's last days of home hospice after a long battle with cancer. This action was hidden from and occurred between visits from Sisters #2 and #3, who learned of the gift a year later, and who contend that Sister #1 played a leading role in planning the gift by coordinating with lawyers to accomplish it. Sister #1 also controls the healthcare and finances of Mom and Dad. The sisters always represented that they were caring for Mom out of love. Compensation never was mentioned or discussed. Whether this gift was one of generosity or altruism or payment or guilt or an owed debt or a promise or whatever can be argued - just ask one of the sisters. Sister #1 was the controlling caretaker although all 3 sisters participated considerably. Sister #1, herself in the depths of great grief and anger, did this way out-of-character for her (thus the broken trust), but now she has adopted and enforced this new character by refusing to return the gift to the family estate or distribute it equally to the other families, which Sisters #2 and #3 have begged her to to do. Thus, a feud has arisen.

The question now is what can Dad do to make things right for the sake of his family and 9 grandchildren who (essentially) were raised along side each other and are close. Dad wants to keep the grandchildren together.
Last edited by ConfusedGrandpop on Mon Oct 28, 2019 11:57 am, edited 2 times in total.

User avatar
JoeRetire
Posts: 3426
Joined: Tue Jan 16, 2018 2:44 pm

Re: Help Dad do estate planning math and make adjustments

Post by JoeRetire » Mon Oct 28, 2019 11:47 am

ConfusedGrandpop wrote:
Sun Oct 27, 2019 11:25 pm
Mom, just before she passed away last year, gave Daughter #1 real estate worth $220,000 debt-free at today’s fair market value. The other daughters received nothing, and this caused a family feud. Dad now wants to give his other two daughters, Daughters #2 and #3, similarly valued cash gifts so there can be peace in the family, assuming Dad can afford to do so.
So, assuming Dad can afford to do so, he should give $220,000 in cash or equivalents to Daughters #2 and #3 now. Perhaps Mom should have done this last year.

Daughter #1 already possess a $220,000 asset, so she gets nothing now. When he passes, his remaining estate can then be split equally.

If that doesn't work, he should talk with a good estate attorney, and leave Daughter #1 at home.

User avatar
JoeRetire
Posts: 3426
Joined: Tue Jan 16, 2018 2:44 pm

Re: Help Dad do estate planning math and make adjustments

Post by JoeRetire » Mon Oct 28, 2019 11:50 am

Jack FFR1846 wrote:
Mon Oct 28, 2019 6:37 am
Dad should decided what he wants to do. He doesn't need a calculator. The answer here could be zero or donations to the local zoo. Nobody is entitled to inheritance.
Apparently you missed the fact that Dad has already decided: "Dad now wants to give his other two daughters, Daughters #2 and #3, similarly valued cash gifts so there can be peace in the family, assuming Dad can afford to do so."

User avatar
JoeRetire
Posts: 3426
Joined: Tue Jan 16, 2018 2:44 pm

Re: Help Dad do estate planning math and make adjustments

Post by JoeRetire » Mon Oct 28, 2019 11:51 am

gorow wrote:
Mon Oct 28, 2019 7:44 am
Perhaps Daughter #1 is the one who could solve this by selling the real estate and splitting the proceeds three ways. Then Dad doesn't carry the guilt over the percieved need to make things even.
That could work, too.

delamer
Posts: 9057
Joined: Tue Feb 08, 2011 6:13 pm

Re: Help Dad do estate planning math and make adjustments

Post by delamer » Mon Oct 28, 2019 12:00 pm

ConfusedGrandpop wrote:
Mon Oct 28, 2019 11:10 am
Thank you so much for your many continued, kind and well-considered responses.

The real estate is a share of a beach house.

My understanding is that the cost basis is an inheritance and thus is entitled to stepped-up basis at its value when Mom passed away in 2018. I do not believe a formal appraisal was received at the time, but it can be estimated and there is an accountant involved.
In your original post, you said that “Mom, just before she passed away last year, gave Daughter #1...”

If the mother changed her will just before she died but the daughter got the real estate after the mother died, then you are right regarding the step-up.

But if the daughter received title before the mother died, then she also received the mother’s cost basis.

HomeStretch
Posts: 2503
Joined: Thu Dec 27, 2018 3:06 pm

Re: Help Dad do estate planning math and make adjustments

Post by HomeStretch » Mon Oct 28, 2019 12:08 pm

Sorry to hear the details. Sounds like Dad went to the attorney’s office with mom and D1 so he was aware of mom’s gift/bequest or agreed to gift as a joint owner. Perhaps Dad needs to rethink having D1 as sole DPOA (and Executor of his will?) for financial matters. She behaved uncharacteristically once, is immune to the family discord, has argued for an unfair gift amount to “fix” the issue (at Dad’s expense) and may do so again when she discovers the gifts, if any, in an amount other than what she has said is fair.

User avatar
David Jay
Posts: 7133
Joined: Mon Mar 30, 2015 5:54 am
Location: Michigan

Re: Help Dad do estate planning math and make adjustments

Post by David Jay » Mon Oct 28, 2019 12:12 pm

ConfusedGrandpop wrote:
Mon Oct 28, 2019 11:23 am
The question now is what can Dad do to make things right for the sake of his family and 9 grandchildren who (essentially) were raised along side each other and are close. Dad wants to keep the grandchildren together.
Define “make things right”. “Making things right” to me would mean consequences for D1 for her manipulation of her dying mother. Which to me would mean writing D1 out of my estate entirely.

But that’s just me.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

HeelaMonster
Posts: 104
Joined: Sat Aug 10, 2019 11:46 am

Re: Help Dad do estate planning math and make adjustments

Post by HeelaMonster » Mon Oct 28, 2019 12:21 pm

ConfusedGrandpop wrote:
Mon Oct 28, 2019 11:10 am
Thank you so much for your many continued, kind and well-considered responses.

The real estate is a share of a beach house.

My understanding is that the cost basis is an inheritance and thus is entitled to stepped-up basis at its value when Mom passed away in 2018. I do not believe a formal appraisal was received at the time, but it can be estimated and there is an accountant involved.
One more clarification needed, given this additional information: Does this "share of a beach house" represent the entirety of this family's ownership in the beach house, or is it just a portion and there are more "shares" still in Dad's possession? I am assuming the former (which presumably means other shares are owned by other groups or families, not involved in any of this). OTOH, if this wasn't 100% of their ownership, that becomes relevant to the current scenario.

clip651
Posts: 432
Joined: Thu Oct 02, 2014 11:02 am

Re: Help Dad do estate planning math and make adjustments

Post by clip651 » Mon Oct 28, 2019 12:57 pm

ConfusedGrandpop wrote:
Mon Oct 28, 2019 11:23 am
I tried to avoid the drama, as it doesn't look good for anyone or help to achieve the solution, but here are some additional facts if they help shed light on the matter:

The feud itself has more to do with how the gift was made, and a longstanding implicit trust that was broken by Sister #1's actions to accomplish the gift when she took her parents to a law office during her Mom's last days of home hospice after a long battle with cancer. This action was hidden from and occurred between visits from Sisters #2 and #3, who learned of the gift a year later, and who contend that Sister #1 played a leading role in planning the gift by coordinating with lawyers to accomplish it. Sister #1 also controls the healthcare and finances of Mom and Dad. The sisters always represented that they were caring for Mom out of love. Compensation never was mentioned or discussed. Whether this gift was one of generosity or altruism or payment or guilt or an owed debt or a promise or whatever can be argued - just ask one of the sisters. Sister #1 was the controlling caretaker although all 3 sisters participated considerably. Sister #1, herself in the depths of great grief and anger, did this way out-of-character for her (thus the broken trust), but now she has adopted and enforced this new character by refusing to return the gift to the family estate or distribute it equally to the other families, which Sisters #2 and #3 have begged her to to do. Thus, a feud has arisen.

The question now is what can Dad do to make things right for the sake of his family and 9 grandchildren who (essentially) were raised along side each other and are close. Dad wants to keep the grandchildren together.
A few thoughts to consider ... you don't have to answer all these questions here, but they are things Dad (or Dad's trusted advisors aside from the sisters) may want to consider.

You're describing the situation third hand, so it's difficult to tell if you are "Dad", a friend, or what. I'll type as though you're a friend advising "Dad."

Sounds like Mom and Dad were both at the lawyer's visit that caused the beach house share to be given by Mom to sister 1. What was Dad's opinion of this at the time it occurred? Was he in agreement? Was there a particular reason for this decision? How is Dad's health and memory? Did he participate fully in the decision (and have the capacity to do so)? I'm sure this was a stressful time for all. Any chance Mom also intended to arrange for other gifts for sister's 2 and 3 and ran out of time? Or that Mom was too tired to think straight and realize that all three sisters might need to be recognized?

If sister 1 had primary control of Mom and Dad's healthcare and finances during Mom's long battle with cancer, sister 1 may have carried a heavy load, even with help from the other sisters. Mom may have wanted to give her a substantial gift to thank her for taking on these tasks. Or sister 1 may have abused her position to get the gift that she wanted from her Mom when her Mom was very vulnerable and sister 1 was also under stress at the same time. Or something in between.

Agree with another poster above who mentioned that Dad may want to reconsider who has primary control of his financial affairs while he is alive, and who will be responsible for dividing things up when he's gone. From what you've described, there is doubt about Sister 1's ability to do this with integrity. Even if the doubt (in the minds of the other sisters) is incorrect, continuing to leave her responsible may promote further family discord. Given the current discord, it might be good if someone other than any of the sisters could be found that could be responsible for the financial things. If serious financial abuse by sister 1 is suspected, other options could also be considered, such as writing her out of the will, etc. But that could cause complicated feelings, too. But first off, protect Dad, if needed.

Dad should look carefully at his own financial situation before making any additional gifts in an attempt to straighten things out. You haven't provided any details of his situation, so hard to know if a couple of 220,000 gifts to the other sisters would be impossible, a big drain on his finances, no big deal, or what.

If the end desired goal is to keep family harmony, having the sisters and the grandchildren have a good relationship going forward, etc, then family therapy may be more helpful than simply focusing on evening out the financial gifts (and/or inheritances) to each sister. Figure out what went wrong, who's mad about what, what can be done to fairly resolve things to everyone's satisfaction, etc. There is no guarantee that making appropriately equal gifts to sisters 2 and 3 will restore harmony. Bad feelings about sister 1's behavior, or perceived behavior, may persist regardless of gifts of inheritances.

If the beach house is a sentimental asset to all sisters, then ways of having all sisters continue to have access might be a reasonable goal. Hard to tell from your posts if this might be possible, either with or without cooperation from Sister 1.

In the end it's up to Dad how to handle this. It doesn't really matter what the email from sister 1 says, it's his choice. Maybe he could get some solo advice from an accountant, estate lawyer, and even a family therapist to get a good handle on where he wants to go with this.

Unfortunately it may be messy regardless. In the end, you can't control your children's feelings about each other. But you can try to show them that you tried to be fair, and try to help them want to be nice to each other and appreciate each other.

best wishes,
cj

User avatar
Doom&Gloom
Posts: 2976
Joined: Thu May 08, 2014 3:36 pm

Re: Help Dad do estate planning math and make adjustments

Post by Doom&Gloom » Mon Oct 28, 2019 1:36 pm

OP, this situation sounds eerily similar to DW's. She is one of three children with a now elderly mother who, over the years, made multiple large gifts to one of her children but only a couple gifts of lesser value to the other two. In MIL's case one "child" pushed her hard for frequent gifts while the other two did not. MIL wanted her legacy to "balance out" and for her three children to "share and share alike" and everyone to be happy and get along with each other. Needless to say, MIL and each of her three children had differing ideas of what would be fair. I think the three siblings would agree that by the time that this all came to a head that there was no hope of everybody being happy about it. The three siblings still reside in the same fairly small community, but I doubt any of them would be terribly sad if they never saw either of the other two again.

In your case there are probably at least a few ways that it can be argued to make "fair" gifts to Sisters #2 & #3. However, I can practically guarantee you that the damage to the relationships has already been done and is very likely irreparable. That may have been the case long before the gift of the beach house but that was very likely the point of no return.

Good luck. I don't envy the position of anyone in the family.

Quirkz
Posts: 208
Joined: Mon Jan 14, 2019 5:32 pm

Re: Help Dad do estate planning math and make adjustments

Post by Quirkz » Mon Oct 28, 2019 2:06 pm

Daughter #1's math works ... but only if Dad's current net worth is around 1.7 million. Basically her proposal is his estate is split 8 ways instead of 3, with 3/8ths going to #2, 3/8ths going to #3, and 2/8ths going to #1. That's going to be highly subjective, depending on what his actual worth is, which may or may not be totally out of line with the existing gift.

Scenario 1:
Dad is worth $200k. Each share (1/8) is worth $25k.
#2 & #3 inherit $75k each
#1 gets a total of $270k
Totally imbalanced.
Also, who knows what Dad is living on if that's all he has. He can't afford to give anything away.

Scenario 2:
Dad is worth $2m. Each share (1/8) is worth $250k.
#2 & #3 inherit $750k each
#1 gets a total of $720k
Relatively balanced. Anything in the 1.5-2.5 m range probably comes close, with $1.7m being break-even.

Scenario 3:
Dad is worth $20m. Each share (1/8) is worth $2.5m.
#2 & #3 inherit $7.5m each
#1 gets a total of $2.7m.
Imbalanced, the other direction, and pretty unlikely that #1 is trying to shoot herself in the foot that badly.

As others have said, the dirt-simple way to give a gift that's "even" with another gift is to give one of equal value. All the other machinations over shares and such is totally separated from the original gift, and cannot conclusively make sense or nonsense without knowing the size of the holdings involved, especially projecting years into the future, where it may grow or more likely shrink dramatically with end-of-life circumstances.

not4me
Posts: 666
Joined: Thu May 25, 2017 3:08 pm

Re: Help Dad do estate planning math and make adjustments

Post by not4me » Mon Oct 28, 2019 2:16 pm

ConfusedGrandpop wrote:
Sun Oct 27, 2019 11:25 pm
.

Daughter #1 does many calculations for Dad, and she insists that Daughters #2 and #3 should receive FROM DAD ⅓ of her gift’s value (or $73,333 each) to make things even.

Dad wants to know if Daughter #1’s math is correct. If not, what amount must DAD give to each daughter so that each has received an equal gift?

Daughter #1 also claims that Daughters #2 and #3 must receive the last year's value of the real estate when it was transferred, not this year’s current higher value when Dad makes his payout. Do you agree? Why or why not?

Daughter #1 explains her math in the below email. Can you explain how her argument below proves the correctness of her calculation to make the three sisters equal. Dad doesn’t understand the email, and he would appreciate everyone's help so that he obtains the correct answers.

______________________________

Email from daughter #1 explaining why she is correct:
“...To make things simple, let's say that dad has $100 dollars to leave all of us for inheritance. While he is living, he is offering you and [Sister #3] $25 to make things equal, which means that today you each will get $12.50 (half of $25). When you deduct the $25 from his $100, there is now $75 remaining for inheritance. Much later on (many, many years from now) when the time comes for us to divide the remaining money, that $75 would get divided three ways giving each of us $25. By doing it this way, in the end, I would receive $25, you would receive the original $12.50 plus $25 for a total of $37.50. [Sister #3] would also receive $37.50. (37.50 + 37.50 + 25 = 100) I hope this helps clarify things a little better than what you are presently thinking regarding his offer. I am only trying to help and present the facts clearly.”
Math can be shown as incorrect using #1's emailed example -- assuming the text outside the email is correct. If #2 & #3 are to receive 1/3 now of what #1 got then, based on the example. #1 at the time got $37.50 (1/3 of which she is suggesting they get now) -- giving her a cumulative total of $25 more than the others.

Determining the correct amount can't be determined by facts shown so far. If the beach house share essentially represented a third interest in the beach house & Dad still has the remainder, then it seems clear. Otherwise, might need to consider if Mom had any other assets that didn't go to Dad, whether the beach house has appreciated considerably faster than Dad's other assets, etc.

All that said, I agree with others that Dad won't be able to fix this on his own with financial assets...can't imagine the 3 peacefully sharing a beach house if that is indeed the case.

MrsBDG
Posts: 147
Joined: Thu Apr 13, 2017 4:04 pm

Re: Help Dad do estate planning math and make adjustments

Post by MrsBDG » Mon Oct 28, 2019 3:05 pm

A share of a beach house is both less and more valuable than the stated $220k. Can DD1 sell the share? Is that restricted? If so, then the cash value may be way less and there may be a future of maintenance costs. On the other hand, a share of a beach house could represent all that is good and wholesome in the three girls childhood memories, it could be something that is invaluable to them.

Do you, OP, know, who all shares the beach house? Did D1 just cut the sisters out of a beautiful home they have all loved or is this a shack on a lake shared amongst 23 of Mom's cousins with all sorts of maintenance costs and huge dissension between shared owners? Context could help you get more real life experience influenced advice.

If the share is something valuable to all three, that is tough. If all three want to use the beach house and now two families cannot even access it that will be unforgivable to them.

Gnirk
Posts: 1090
Joined: Sun Sep 09, 2012 3:11 am
Location: Western Washington

Re: Help Dad do estate planning math and make adjustments

Post by Gnirk » Mon Oct 28, 2019 10:20 pm

It appears daughter #1 has way too much influence on her dad.

IMHO, if Dad can afford it, he should give daughters #2 and #3 gifts equal to what mom gave daughter #1.

But that's just me. I try to always make things even between my daughters, unless there are special circumstances, and then it is discussed among the three of us. And this is why any gifting to either of my daughters is totally transparent.

MrBobcat
Posts: 264
Joined: Fri Jan 11, 2019 5:19 pm

Re: Help Dad do estate planning math and make adjustments

Post by MrBobcat » Mon Oct 28, 2019 10:39 pm

Dad should keep his money and daughter #1 should take a mortgage = to 2/3 of the value of the real estate when gifted and give her sisters their 1/3 cut, then they can split any inheritance equally when the time comes.

MrBobcat
Posts: 264
Joined: Fri Jan 11, 2019 5:19 pm

Re: Help Dad do estate planning math and make adjustments

Post by MrBobcat » Mon Oct 28, 2019 10:48 pm

ConfusedGrandpop wrote:
Mon Oct 28, 2019 11:23 am
I tried to avoid the drama, as it doesn't look good for anyone or help to achieve the solution, but here are some additional facts if they help shed light on the matter:

The feud itself has more to do with how the gift was made, and a longstanding implicit trust that was broken by Sister #1's actions to accomplish the gift when she took her parents to a law office during her Mom's last days of home hospice after a long battle with cancer. This action was hidden from and occurred between visits from Sisters #2 and #3, who learned of the gift a year later, and who contend that Sister #1 played a leading role in planning the gift by coordinating with lawyers to accomplish it. Sister #1 also controls the healthcare and finances of Mom and Dad. The sisters always represented that they were caring for Mom out of love. Compensation never was mentioned or discussed. Whether this gift was one of generosity or altruism or payment or guilt or an owed debt or a promise or whatever can be argued - just ask one of the sisters. Sister #1 was the controlling caretaker although all 3 sisters participated considerably. Sister #1, herself in the depths of great grief and anger, did this way out-of-character for her (thus the broken trust), but now she has adopted and enforced this new character by refusing to return the gift to the family estate or distribute it equally to the other families, which Sisters #2 and #3 have begged her to to do. Thus, a feud has arisen.

The question now is what can Dad do to make things right for the sake of his family and 9 grandchildren who (essentially) were raised along side each other and are close. Dad wants to keep the grandchildren together.
Sounds like the beach house might have been a special place to all 3 daughters and daughter 1 managed to get it without daughter 2 & 3 knowing about it until after the fact. I've seen these things with families and it breaks my heart as a parent. I don't see a happy ending unless you're one of the attorneys.

Topic Author
ConfusedGrandpop
Posts: 4
Joined: Sun Oct 27, 2019 11:10 pm

Re: Help Dad do estate planning math and make adjustments

Post by ConfusedGrandpop » Mon Oct 28, 2019 11:53 pm

I again would like to thank everyone who responded for their time and thoughtful insights. I did not answer some of the questions asked of me because, in many cases, the questions asked provide their own answers, and I would just be getting into the weeds. John Bogle used to live in my neighborhood, and I'm told he used to walk by my house, although I never saw him. I'm sure 'Jack' would be proud to see so many selfless and amazing people caring for each other in a real online community named for him and dedicated to his life's mission. This has to be one of the best boards on the Internet.
Last edited by ConfusedGrandpop on Tue Oct 29, 2019 12:24 am, edited 1 time in total.

Lee_WSP
Posts: 1142
Joined: Fri Apr 19, 2019 5:15 pm
Location: Arizona

Re: Help Dad do estate planning math and make adjustments

Post by Lee_WSP » Tue Oct 29, 2019 12:09 am

I don't think Dad is going to be able to solve the feud by giving away his money. They are angry with someone no longer here.

Minty
Posts: 267
Joined: Sun Mar 24, 2013 3:19 pm
Location: NorCal

Re: Help Dad do estate planning math and make adjustments

Post by Minty » Tue Oct 29, 2019 12:13 am

MrBobcat wrote:
Mon Oct 28, 2019 10:39 pm
Dad should keep his money and daughter #1 should take a mortgage = to 2/3 of the value of the real estate when gifted and give her sisters their 1/3 cut, then they can split any inheritance equally when the time comes.
+1
Core Four with nominal bonds and TIPS.

User avatar
celia
Posts: 9732
Joined: Sun Mar 09, 2008 6:32 am
Location: SoCal

Re: Help Dad do estate planning math and make adjustments

Post by celia » Tue Oct 29, 2019 6:56 am

ConfusedGrandpop wrote:
Mon Oct 28, 2019 11:10 am
The real estate is a share of a beach house.
If, by any chance, D1’s share of the house was 33.33% or less and father is living in the house, couldn’t he gift similar shares to the other two daughters with the right to live there as long as he is living?

Although this could seem fair, he would lose the right to sell the property if he had a need for more money in his final years. In that case, he could set the gift up in his will/ trust but then be limited to selling other shares to relatives. At least the other 2 daughters could get a perceived sense of fairness. (I am also assuming there is no mortgage on the beach house and he can afford ongoing maintenance.)

User avatar
Brianmcg321
Posts: 244
Joined: Mon Jul 15, 2019 8:23 am

Re: Help Dad do estate planning math and make adjustments

Post by Brianmcg321 » Tue Oct 29, 2019 7:20 am

David Jay wrote:
Mon Oct 28, 2019 12:12 pm
ConfusedGrandpop wrote:
Mon Oct 28, 2019 11:23 am
The question now is what can Dad do to make things right for the sake of his family and 9 grandchildren who (essentially) were raised along side each other and are close. Dad wants to keep the grandchildren together.
Define “make things right”. “Making things right” to me would mean consequences for D1 for her manipulation of her dying mother. Which to me would mean writing D1 out of my estate entirely.

But that’s just me.
This.

Daughter #1 can pound sand. She gets absolutely no say in this.
Rules to investing: | 1. Don't lose money. | 2. Don't forget rule number 1.

inbox788
Posts: 6575
Joined: Thu Mar 15, 2012 5:24 pm

Re: Help Dad do estate planning math and make adjustments

Post by inbox788 » Thu Nov 07, 2019 5:31 pm

You could ask Daughter #2 and Daughter #3 how much the beach house is worth to them and give them that amount in cash! This way, each daughter would have received the beach house or the equivalent value of the beach house.

Who are you trying to please? Who's going to make the final determination of what is fair? Situations like these are inherently unfair and someone is going to feel like someone else got more.

Even the classic "I cut, you choose" isn't totally envy free, and isn't identical to "You cut, I choose". The person cutting can always get half, but the person choosing gets even more! But in situations like these, the person cutting (i.e. making the splitting decisions) can try to purposely sour or devalue a piece they value more in attempts to get more than their fair share. The whole isn't always the sum of the parts.

You have the beginnings of a marketplace solution. Daughter #1 claims that $73,333 each to #2 and #3 would make things even. What amount do the other daughters want to make things fair? A fair answer lies somewhere in between, but won't please anyone. And once you throw the real estate into the equation, it gets much more complicated.

The simple answer is to liquidate everything being contested, and divide by 3, but that's undesirable to some and even then, unless the 3 daughters are identical triplets in identical situations with identical futures, there are grounds for a non-equal distribution (such as older daughter was provided private university and professional school and younger daughter is still in middle school, providing advance education incentives, help less fortunate daughter, one of the kids has special needs, etc.).

Late to the party, but the email math is meaningless, and add up to "she insists that Daughters #2 and #3 should receive FROM DAD ⅓ of her gift’s value".

And since you mentioned grandkids, dad and you all should learn about the difference between "per capita" and "per stirpes". I'm still undecided on the matter, but your state inheritance laws are, and you should be aware.
https://en.wikipedia.org/wiki/Per_stirpes
https://law.freeadvice.com/estate_plann ... capita.htm

smackboy1
Posts: 1126
Joined: Wed Mar 14, 2007 9:41 pm

Re: Help Dad do estate planning math and make adjustments

Post by smackboy1 » Fri Nov 08, 2019 10:59 am

ConfusedGrandpop wrote:
Mon Oct 28, 2019 11:23 am
The feud itself has more to do with how the gift was made, and a longstanding implicit trust that was broken by Sister #1's actions to accomplish the gift when she took her parents to a law office during her Mom's last days of home hospice after a long battle with cancer. This action was hidden from and occurred between visits from Sisters #2 and #3, who learned of the gift a year later, and who contend that Sister #1 played a leading role in planning the gift by coordinating with lawyers to accomplish it. Sister #1 also controls the healthcare and finances of Mom and Dad.
This.

It's not an estate planning or math problem. I don't even know if this is an envy-free division problem. This is a problem of broken family trust and is emotional. If Dad wants future happy Thanksgivings, the solution isn't going to be solely financial. I would recommend some family counseling and then using a mediator to fix the financial aspects. Neutral parties can say and do things that do not come with emotional baggage.

There's nothing equal or fair about families. D1 seems to have done more caregiving and has more legal responsibility. D2 and D3 probably would have agreed that D1's effort deserved some kind of compensation, but now that trust is broken, nobody is really being rational or or trusting. A neutral therapist can probably help get everybody communicating again.

The financial fix isn't going to come from D1, D2 or D3. There's just no trust. It could come from Dad with the help of a neutral mediator and would hopefully be agreeable to D1, D2 and D3. Nobody in the family seems to really understand how to properly value real estate so picking a mediator with some RE expertise would probably be smart.

I would not recommend pre-determining the split of the entire estate at this time as part of any settlement. Fix the $220K RE gift. Dad should talk to his own estate planning lawyer about how to split the rest of it without undue influence of any one of D1, D2 and D3. Understand that many things could happen in the future before Dad passes and the last thing he would want is to have to break promises made.
Disclaimer: nothing written here should be taken as legal advice, but I did stay at a Holiday Inn Express last night.

stochastic
Posts: 48
Joined: Sun Sep 06, 2015 5:09 pm

Re: Help Dad do estate planning math and make adjustments

Post by stochastic » Fri Nov 08, 2019 12:29 pm

The issue of family dynamics is very complicated but the math is not complicated and I'm a math professor so let me focus on that.

Daughter #1 is making a mistake because she is confusing the dad giving $73.33k to each daughter with her giving 73.33k to each daughter - these give very different results.

If D1 gave each sister 73k from her money then that would be an equal allocation. She would have 220 - 2*(73.33) = 73.33, and D2,3 would also have 73.33. Then the remaining inheritance could be divided equally. This version is equivalent to the three daughters being left 1/3 share of the 220 house and then D#1 buying out the shares of D2 and D3 so that's an equal allocation.

If the money comes from the dad then that makes things different because it changes the total pool of inheritance. If the total pool of assets was 220k + x then an equal allocation would leave each daughter with 73.33k + x/3. If the dad gave D2 and D3 73.33k each, their total share would be 73.33 + (x - 73.33*2)/3 = 24.444 + x/3 while D1 would receive 220 + (x - 73.33*2)/3 = 122.22 + x/3 so certainly not equal. If dad gave D2 and D3 each 220 now and then split the total inheritance then all three daughters would receive 73.33 + x (they would each get 220 + (x-440)/3 = 73.33 + x/3) so that would be an equal allocation.

Of course it is up to the dad to decide how he wants to give away his money but if his aim is an equal allocation, the correct things is to give D2 and D3 220k each. It would also be fair if D1 gave D2 and D3 73.33k each.

The math mistake of D1 benefits her but don't necessarily assume she is being greedy. A friend of mine (who has a quantitative PhD) made the same error with respect to dividing assets with her ex. She was mortified when she realised she was cheating him out of some money but then had to walk through the calculations to convince him that her original math was wrong.

MrsBDG
Posts: 147
Joined: Thu Apr 13, 2017 4:04 pm

Re: Help Dad do estate planning math and make adjustments

Post by MrsBDG » Fri Nov 08, 2019 2:24 pm

! agree with stochastic that even smart people can take a complex situation,especially an emotional one, and follow the wrong path on the math. I know when my husband handled some estate stuff he would come up with how to do some portion of a complicated aspect being divided, then run it by me, sometimes we would each come up with an option and upon reviewing each other's math, realize a third method was most fair and accurate. It's possible she thinks her math is correct, and, of course, there is a subconscious bent to do the math beneficially further complicating things.

Post Reply