Investing in You: To avoid inheritance minefield and sibling rivalries, discuss disposition of belongings now

What are you going to do with all your stuff?

Baby boomers amassed serious assets during their lifetimes. Say you want to leave your children and grandkids some personal belongings - art, furniture, books, sterling silver and collectibles. Often that's done through a will.

But it's best to have "the talk" while you're alive.

Perhaps more than one child wants something with memories: mom's cookie jar, dad's pipe, or grandma's overstuffed chair.

Welcome to an inheritance minefield. Many parents rightly worry that sibling rivalries will emerge after their deaths. Emotions run high after a parent dies or is incapacitated due to illness. That's not the time to discuss who gets what. How can parents and heirs prepare today?

Talk, as a family, during your lifetime.

Say your recently divorced adult child just downsized to a smaller apartment. He or she may love music, but is no longer a candidate for your album collection or grand piano.

Airing these issues as a family resets outdated assumptions, says Lee Miller, managing director and wealth planner with Glenmede Trust.

No one wants to face the end of life. But sometimes children can initiate the conversation. One approach is a "what if" conversation, as in: If something happens to you, are there particular things you have in mind for each of us? What items should be sold if we need to pay for your care?

After a parent dies, an executor is appointed to value assets. What's everything worth? Independent, outside appraisers for probate and tax purposes are a good starting point.

Heirs need to understand the true value when divvying up parents' property. Sometimes, that holds a nasty surprise.

"One of my clients held on to her mother-in-law's furniture for decades, even though she hated it. Her mother-in-law bragged the furniture was priceless," Miller says. "After she died, my client found it was worth about $300. She felt very betrayed."

Who inherits the family vacation home? Here's a novel solution: parents can place the Poconos cabin or beach cottage into a limited liability company, or LLC. Fund it with cash or divide up ownership among siblings.

It's lovely to imagine your children and grandchildren, enjoying carefree summers at the family cottage after you're gone. "But factor in lifestyle, emotions and finances and avoid intra-family conflicts over an expensive asset," Miller adds.

Say you leave a vacation home to your three children. One lives on the other side of the country and asks the others to buy him or her out. That one sibling can force the issue - in court - and eventually prompt a sale.

Even middle-class families can establish an LLC to accommodate intra-family transfers and provide a framework for sharing expenses. (Check Legalzoom.com for sample documents).

A vacation home LLC should also include "governance," or the rules by which everyone abides:

Finances: How will expenses (taxes, utilities, insurance, liability coverage, boats/skis, redecorating) be paid once parents are gone? Will there be an annual assessment or fee for use?

Scheduling: Hatch a plan for equitable sharing of peak season. Also, what about renting? Can a sibling lease out his/her week on Airbnb, for example?

Management: Is one person assigned as manager, perhaps on a rotating basis? For votes, does simple majority control? Redecorating and maintenance are often flash points in family property.

Succession: Is there a process for family members to exit the ownership? Who has right of first refusal? What happens if a sibling dies?

Thomas Rogerson, Wilmington Trust's Family Wealth Strategist, advises talking - a lot. "Successful families begin exposing their children to the group decision-making process very early on, and gradually increase their involvement as they grow up," he said.

Sell your collection - or your stuff. For example, an avid book collector negotiated a sale of her collection to a university library. She earned enormous pride and some cash during her lifetime, and eliminated the burden of her children having to dispense with an obscure but valuable collection later, Glenmede Trust's Lee Miller says.

Put your wishes in writing. Although a letter of instruction may not be legally binding under each state's law, a signed document makes clear who you intend as recipients. One of Miller's clients who didn't sell a collection during her lifetime permitted her children to do so, writing instructions allowing the sale of an antique desk for grandchildren's college tuition.

Pre-select items. Some families place color-coded stickers on the underside of objects to identify who will eventually receive the item. Sounds creepy, but it's better than fighting later.

IF YOU'RE AN HEIR

Make a list. Heirs can compile a list of favorite items, and then a third party outside the family reconciles conflicting requests.

Draw straws. The first person picks one item they want; the second person begins round two, the third person round three, and so forth until all mom and dad's things have been chosen. Separate items of sentimental value from more expensive pieces so everyone gets a crack at grandma's pie plates versus grandpa's silver.

Hold a family auction. Using play money, auctions can be live or silent, with heirs free to trade once the auction is completed.

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