I read an interesting article in Business Week (6-9-08) about how people divide their estates before/after their death. Estate planning has come up in several conversations recently, so I thought I would share what I learned.
Many people create the standard list and assign a name to each item. Some people put colored dots on the backs of items and say blue is for x and red goes to y. If you are doing either of these, the article suggests you explain why one child gets x and not y, so there are no misunderstandings later. It turns out that these 2 methods may not be legally binding!
The article also says you should ask your heirs what they would like. You may be surprised to find out they have no interest in x but really want y. One family had a "select your favorite items" Thanksgiving (when everyone was gathered together).
If you have only one every expensive item, and child A gets that item, then child B should get more money.
The most interesting idea was the auction. A women who was downsizing had an appraiser estimate the worth of her possessions. She then divide the value by the number of heirs (ex. $400K/4 kids = $100K each). She then allowed each child to select up to 100K of items that they wanted.
The biggest thing that I learned was that if you discuss splitting your estate while you are alive, it will make it much easier for your family after you are gone.