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When siblings fight after inheriting properties in equal shares

When siblings fight after inheriting properties in equal shares

Source: Straits Times
Article Date: 09 Jun 2024
Author: Tan Ooi Boon

If everyone holds an equal stake in multiple properties, a dispute can happen as no one has an upper hand to make any decision.

Anyone hesitating over writing a will need only look at a ferocious battle fought by four siblings over their father’s properties to see how essential legacy planning is.

In an almost text book example of how things can go wrong, the father died without a will, so his main assets – two shophouses in Jurong worth about $5 million – had to be distributed equally among his three daughters and a son according to intestate law.

The children’s mother did not get a share because the parents divorced before their father died in 2011.

Since there was no will, the man’s two older daughters volunteered to look after his estate and manage the rental income from the shophouses.

All was well for about 10 years but splits began to emerge and the siblings broke into two factions, with the youngest daughter siding with her eldest sister, while their brother aligned with the second sister.

Each held a quarter stake in the properties, so no one had the upper hand. Any vote would result in a two-two deadlock. The two factions could not see eye to eye because both sides insisted on doing things their way. For instance, even when they all agreed to sell the shophouses, they fought over how this should be done.

A neutral bystander would think that they could have at least agreed that it would be in their interest to sell at the highest possible price, with both sides trying to secure the best offers. Yet the siblings fought over the right to sell all the way to the High Court.

High Court Judge Goh Yihan broke the increasingly toxic impasse by ordering the combatants to appoint a lawyer to conduct the valuation and sale of the properties to ensure a process that would be “free from the disputes that have plagued the parties”.

“While this requires the parties to come together to appoint the solicitor, I trust that they will see the bigger picture pertaining to the importance of selling the properties,” he said, adding that he hoped both sides would try their best to resolve those issues without coming back to court.

Here are three things that every­one should know when it comes to managing family assets.

Lack of will can harm beneficiaries

Some lawyers use this example to show the severe consequences of not having a will: A widow owned a house and lived there with her unmarried daughter, who took care of her. The widow had three sons, who have their own homes and families.

The widow died suddenly and without a will. That meant the house would be shared equally among her four children.

As the daughter was unable to buy the shares of her siblings, the house had to be sold so that the proceeds could be divided equally. If the daughter’s quarter share of the proceeds was insufficient to buy a property, she would be left without a home.

Things would have been different if the widow had willed the home to the daughter as she needed it most, or had given her a bigger share so that she could buy her own place.

In the case of the two shophouses, everything the father owned had to be divided equally among the four children.

Even if the man had intended to benefit his children equally, the outcome could have been different if the two shophouses were split between the factions, so that each was owned by two of the siblings.

There would be no reason to fight as each side would have their own shophouse to manage and they could decide whether to sell.

Appointing suitable executors

It goes without saying that failing to appoint a suitable person to manage your affairs after you are gone can result in considerable trouble for your family.

Like any good caretaker, the candidate must be someone who can get things done, and be able to command the respect of your beneficiaries. Otherwise, things can spiral out of control and end in a mess.

Take the case of a wealthy businessman who had appointed his secretary and lawyer to be the executors of his estate. Trouble started soon after he died because his family hated the long-time secretary and gave her so much grief that she eventually resigned from the post.

But her departure left the unfortunate lawyer in the dark as she was the only person who knew where most important documents were kept. As a result, it took years before the inheritance for the beneficiaries was sorted out.

In the shophouse case, there was no opportunity to pick someone who could have managed the assets well because the father died without a will.

His two eldest children stepped forward to manage the estate jointly. But this partnership was doomed from the start because the eldest child was based overseas and the bulk of the work was done by the other person.

To make matters worse, their relationship later deteriorated to such an extent that it was impossible for them to work together as co-administrators of the estate.

Not surprisingly, both sides soon started to take pot shots at each other and the animosity was so bad that the matter had to be resolved in court.

Duty of an executor

When it comes to managing money, you should appoint someone who has a good head for numbers and detail or there will certainly be trouble if allegations of missing funds surface.

In the shophouse case, one unit was leased, with the second sister tasked with managing it.

But her idea of reporting the annual rental income to the rest was to send simple WhatsApp messages stating the total rent collected and any expenses incurred.

In 2020, for example, total net income came to $71,167. She stated in the message that each person would get $17,791 after the amount was “divided by 4”.

As no other supporting documents were shown, the other faction cried foul and questioned whether the accounting was accurate.

Judge Goh found the record incomplete, as it was merely the addition of unsubstantiated figures that supposedly represented the rental income.

“I do not think that an administrator can claim to have fulfilled his or her duty of keeping a proper account of the assets in an estate if the only record is that of a WhatsApp message or, more specifically, a screenshot sent as a WhatsApp message, of figures that lack any proper basis or substantiation,” he said.

While the second sister was not a professional trustee and was undertaking the lion’s share of administering the estate, the judge noted that it was not unduly onerous for her to provide some documentation to substantiate the various amounts.

The bottom line is that there is no shortcut when it comes to managing your assets. If you fail to do that properly when you are still able to do so, you are merely pushing back the problem to a later date and that can prove very costly for the whole family.

Source: Straits Times © SPH Media Limited. Permission required for reproduction.

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