Psychological Thoughts on the Evaluation of Estate Assets
Every family has fracture lines on which they will split apart under pressure and stress (using the imagery of earthquake faults). The division of estates after the death of parents is such a stressful situation. Families can splinter into individuals who never speak to each other again. Larger families can fracture into parts or factions that can remain perpetually at war.
Some siblings get along well before, during, and after such periods of stress. They remain friendly even under the duress of the death of loved parents and the innumerable technical problems that arise in the division of an estate.
Parents can make the situation easier, and assuming they are on good and loving terms with their children, by having a clear and rational will (and trust) that lays down exactly who will get what and who will be in charge of the division and if and how this person will be compensated for any work.
However, problems can creep even in such a situation. These are the situations where one or more members of a family consult with a psychologist, and it is this type of situation that I am discussing here.
Many types of problems can arise at every stage of the process. The one I will discuss here has to do with the evaluating of estate assets.
Most estates, from the greatest to the smallest, involve cash or cash equivalents (such as a liquid bank account or stocks) but also property such as furniture, silverware, a house, and possible family jewelry. Some parents leave a clear statement as to exactly who gets what. I have heard of parents who write up a list of everything they own with a name attached to each item.
This approach does not automatically prevent the children from squabbling, as one may feel slighted by the parents.
Further there are assets that have family meaning, sometimes unknown to the parent, and one child can feel left out or slighted or hurt even if, on a financial level, everything is equal.
So, if the siblings are at odds and are competitive, labeling who gets what may not come close to preventing anger and resentment. In this article, however, I want to discuss a more subtle problem: It is the problem of how to make a financial evaluation of the property, not of the cash and cash equivalents.
Let’s say the parents make it easy and write in the will that they want an exactly even distribution of their assets (less the reasonable payment going to the executor). Dividing cash is easy. Dividing bank accounts and stock is a little less easy. For example, at what date do you decide to take stock value?
But a still more difficult question is, “How do you evaluate the financial value of non-liquid assets like a home, furniture, art work, jewelry, etc?”
I can think of five ways, and each one has problems. In the practice of psychotherapy, explaining these problems to an angry and hurt patient may be useful.
Five ways of evaluating non-liquid assets
1) The most straightforward, and probably the most rational, is to take all the property and sell it, that is, convert everything into cash. Then a division can be made. Though this is the clearest way, it has its problems. When should the sale of property begin? How fast should it be done? Who should do it? And how? These are all difficult questions with no easy answer. For example, if you sell everything as soon as possible, you will, almost certainly, not get the best price. Some siblings may not care; how it is done; others might want the money now, even if it is less (ones who have current debts or who are paranoid or who, perhaps, have a terminal illness, etc.); and others might want to hold out for the best price of the goods.
2) Another point of contention, in a family that is ready to contend, is who is doing the assessment. If a family member is the executor of the will, the other siblings may question the method of assessment or the speed. It may seem that this can be avoided by the parent by appointing an outside executor, or it may be thought that a sibling executor, under fire, might avoid the pressure by hiring a professional assessor or lawyer or mediator (or judge) to make the evaluation, but this approach may also cause a dispute: Some may feel it eats into the overall value to hire such a person; others may question the credentials and abilities and motives of anyone given the power to make such an assessment; and so on. For example, if the assessor is someone known by a sibling, it is possible for the others to wonder if there isn’t some sort of secret agreement between the assessor and the sibling who hired him or her. In addition, all the problems and questions mentioned in 1) above are present here too.
3) If the assets are not going to be converted into cash, the obvious problem is how do you evaluate the value of this or that? Another question is at what point do you do the evaluation (the day of death of the last parent, the day of division, etc.)? Each sib will have his or her own way of evaluating. There will be a tendency for a sib that wants a piece of furniture, for example, to undervalue it and for a sib not getting that piece to overvalue it. It is worse if the executor is one of the sibs who will be getting some of the property. Endless suspicions will arise, and I see no rational way to solve this problem. It may seem that, since there is probably no right answer, each sib might come up with a list of evaluations and that an average could be taken of each item on the list. However, some sibs will not be willing or able to make such a list; others will make a completely unrealistic evaluation of their own items and the items of others, even if this is only unconscious; and some sibs will not have good will and may make an attempt to cheat the others.
4) The last way I can think of is to hire more than one assessor to go through the property. After each list is completed, the average evaluation for each item is calculated, and that becomes the assessed value of that item. However, this approach is subject to the same problems as 1-3 above.
5) An approach I have seen that also tends not to work is for the executor to divide up the property into equal portions. Each sib picks a number out of an hat which determines the order of who picks. Then each picks in order. This also has obvious problems.
There may be a better way to make such an assessment, but I do not see how. On the other hand, if you assume good will between the sibs, love, rationality, an acceptance that nothing in life is perfect, and the ability to handle complex problems, even a complex division can go smoothly. As a psychologist, I find it interesting, that there seem to be some situations in life, the assessment of property being one of them, where there is no rational approach that will be completely satisfactory to everyone involved and that can set off fireworks in even a relatively stable family.