Splitting Between Siblings

Marie needs Dave's help figuring out the best way to distribute her mother-in-law's estate.

QUESTION: Marie from New Mexico says her husband is an administrator for his mother's estate, which holds a real estate contract with a balance of $52,000. The estate will receive $1,500 per month for 33 months before the contract is paid in full. They are considering buying out his siblings to take full possession of the estate. What would Dave do?

Dave's ANSWER: Why would you buy them out? Why not just pay out the checks? It's only 33 checks. It's not like this is for 33 years. Three years goes very fast, it's an eyeblink. I wouldn't buy them out, because you’re broke.

You are just now getting out of debt and building your emergency fund. You are doing good things; you don't have the money to write a check and buy this thing out. It's not a matter of your husband being non-sweet by doing this.

I’m very sorry that his mom died, and it's a sad and hurtful time for these brothers and sisters to go through. But basically one check comes in for $1,500 a month and four checks go out. It's not that big a deal. If it were a long, long time I might try to work something out, but even if they don't like each other, they can still cash the checks.

Divide each $1,500 check by four, exactly to the penny. The check will go into the estate and the estate writes the checks back out each month. It's not any harder than that. If you have some money saved up at some point in that process and want to buy someone out, the proper way to do that would be to discount it. You wouldn't pay their full share of it.

If I buy a note with a balance of $42,000, you don't want to pay $42,000 for that. You discount it because you'll get your $42,000 back over time. There's a proper financial calculation for that. By the time you discount this, there is nothing there. It's going to get very emotional all of a sudden if you do that. I would suggest that you just write four checks and be done with it.

It's not that tough, and hopefully the other things in the estate are not that complicated either.