SIBLING-SHARED INHERITANCES

Red Flags, Yellow Flags…or Green Flags?

In his "Children in a Rowboat" articles¹, Atlanta attorney Robert Edge perpetuates a popular notion among estate planners about sibling-shared inheritance:

"The number one opportunity for an estate plan to go wrong occurs when parents tie the children to the same asset or when they require the children to do a job together as a group. This can happen when a surviving parent names several children to serve as executors of a complicated estate, to run the family business, to share an expensive house, or even to distribute assets of the family foundation.

"Imagine loading the children into a rowboat on a big lake and requiring them to agree on one destination when their rowboat can go in only one direction, no matter how many passengers it holds.

"There may not be many truisms in estate planning, but there is one goal that has prime importance for almost all clients: they do not want a legacy to result in their children avoiding one another.

"Plans that require children to agree among themselves when their parents are both gone are simply fraught with danger. Don't we owe the client at least a yellow flag, or sometimes a red one, when a suggestion is made to put the children in the same rowboat as fiduciaries or beneficiaries?"

Thus the conventional wisdom is that children in a rowboat fly a red flag…or at least a yellow flag. I suspect Bob Edge speaks from long experience with contentious sibling heirs. Mark Twain's wry remark comes to mind:

"You never really know someone until you share an inheritance with them."

Contentious sibling rivalries don't turn themselves into lawsuits. The legal system is an arch enabler. Elsewhere I wrote:

"A war-like 'win-lose' radical individualism permeates the law's current approach to all human relationships, whether commercial or personal. The adversary process assumes that all relationships will ultimately fail, whereupon every individual will need a lawyer to protect him or her from everyone else, even from family."²

No doubt some sibling relationships would be better served by separated inheritances. It's better to sell their parents' vacation home than to suffer the ongoing ordeal of fights over access and fussing over maintenance. But for other siblings, the very sharing of their parents' vacation home reinforces relationships, preserves memories, continues to connect them.

How does an advisor determine whether clients' children are good risks to share an inheritance—red flag or green flag? Does the advisor raise the issue of shared inheritance as a neutral, yellow flag perhaps, or reveal advisor bias based on some bitter past experiences with other families of ill-sharing siblings—i.e. red flag, "children in a rowboat"?

Consider other "rowboat" implications. Notwithstanding advisors' red flags, lots of fifty-fifty partnerships work out just fine. That most prevalent fifty-fifty partnership—marriage—is also risky. But just because half of the marriages entered this year will end in divorce, neither Bob Edge nor I would discourage formation of marital partnerships, though both might counsel caution and a close look at prenuptial agreements. Is the couple prepared to work through the stresses of a wealthy marriage?

In almost every case of ill-shared inheritances and stuck family businesses I encounter, family members were under prepared for the acute interpersonal stresses associated with being joined at the wallet. Family skills have been neglected and need work. Here's a partial listing of specific family skills I think necessary to successfully share an inheritance or a business:

• Habits of comfortable communication.
• Clear boundaries between personal independence and family interdependence.
• Rivalry management.
• Accepting differences.
• A capacity to differentiate between thinking and feeling, and a vocabulary for both.
• A willingness to forgive.
• Healthy emotional engagement.
• The ability to listen without judging.
• An understanding that encourages individual family members to speak their own minds, but discourages them from trying to speak others' minds.

Why not share this checklist of family skills with clients contemplating sibling-shared inheritances? Or better yet, suggest that the clients to share the checklist with their children? In my view, broad family feedback is the best indicator of whether a sibling-shared inheritance makes sense. Further, it's helpful to ascertain if the potentially sharing siblings like each other, and whether they favor or oppose the prospect of shared inheritance.

If family feedback indicates deficiencies in family skills, or yellow - or red flags to shared inheritance, the family's relational estate may need work. Relational estates are very high maintenance. For wealthy families who want to remediate some neglected family skills, a family council can offer the needed impetus and structure.

In the military, we trained in heavy oceangoing lifeboats, six facing aft heaving hard on the oars, a coxswain manning the tiller, barking the cadence. A successful family council is no recreational rowboat on a pond. It's more like a lifeboat with everyone pulling an oar to keep family and fortune afloat in sometimes heavy seas.

A successful family council can be the family's lifeboat.

—Gerald Le Van, April 2005