Let's look at another example where three siblings want to divide their inheritance. Their names are Sarah, Robert, and Michelle. In this case, the division is not even because Michelle took over a majority of the care of the girls' parents towards the end of their lives. Michelle will get 50% of the estate while Sarah and Robert each get 25%, as indicated in their parents' wills. There are 3 big items to be divided: the large house that the parents lived in during retirement, the yacht, and the vacation home in France. Once again, the siblings all place a value on the three items without discussing this with the other two. Michelle lives in the same town in which her parents retired so it is logical for her to want the house they lived in for the last ten years of their life together. Sarah lives on the water and has two young children and a husband with whom she hopes to travel so she would like the yacht that her father and Robert has been renting a home in France with his wife and children for the past three summers so he would like to have the vacation home there to avoid the renting fees. |
Michelle gets the house and therefore puts $750,000 in the pot (50% of the value she placed on it).
Sarah gets the yacht and puts $450,000 in the pot (75% of the value she placed on it).
Robert gets the vacation home and therefore puts $1,275,000 in the pot (75% of the value she placed on it).
At this point, there is $2,475,000 in the pot.
From the pot...
Michelle takes $200,000 (50% of the value she placed on the yacht) and $500,000 (50% of the value she placed on the vacation home). Total: $700,000.
Sarah takes $300,000 (25% of the value she placed on the house) and $275,000 (25% of the value she placed on the vacation home). Total: $575,000.
Robert takes $325,000 (25% of the value he placed on the house) and $87,500 (25% of the value he placed on the yacht). Total: $412,500.
Grand Total from this step: $1,687,500 so there is $787,500 in the pot.
This means that Michelle gets 50% of that ($393,750) and Sarah and Robert each get 25% ($196,875).
In total...
Michelle gets $1.5million (house) - $750,000 (in the pot) + $700,000 (yacht and vacation home) + $393,750 (from the pot) = $1,843,750
Sarah gets $600,000 (yacht) - $450,000 (in the pot) + $575,000 (house and vacation home) + $196,875 (from the pot) = $921,875
Robert gets $1.7million (vacation home) - $1.275million (in the pot) + $412,500 (house and yacht) + $196,875 (from the pot) = $1,034,375
Expected Totals:
Based on their value assignments to the three big items...
Michelle would have expected to receive $1,450,000.
Sarah would have expected to receive $725,000.
Robert would have expected to receive $837,500.
They are all likely happy with these outcomes.
Sarah gets the yacht and puts $450,000 in the pot (75% of the value she placed on it).
Robert gets the vacation home and therefore puts $1,275,000 in the pot (75% of the value she placed on it).
At this point, there is $2,475,000 in the pot.
From the pot...
Michelle takes $200,000 (50% of the value she placed on the yacht) and $500,000 (50% of the value she placed on the vacation home). Total: $700,000.
Sarah takes $300,000 (25% of the value she placed on the house) and $275,000 (25% of the value she placed on the vacation home). Total: $575,000.
Robert takes $325,000 (25% of the value he placed on the house) and $87,500 (25% of the value he placed on the yacht). Total: $412,500.
Grand Total from this step: $1,687,500 so there is $787,500 in the pot.
This means that Michelle gets 50% of that ($393,750) and Sarah and Robert each get 25% ($196,875).
In total...
Michelle gets $1.5million (house) - $750,000 (in the pot) + $700,000 (yacht and vacation home) + $393,750 (from the pot) = $1,843,750
Sarah gets $600,000 (yacht) - $450,000 (in the pot) + $575,000 (house and vacation home) + $196,875 (from the pot) = $921,875
Robert gets $1.7million (vacation home) - $1.275million (in the pot) + $412,500 (house and yacht) + $196,875 (from the pot) = $1,034,375
Expected Totals:
Based on their value assignments to the three big items...
Michelle would have expected to receive $1,450,000.
Sarah would have expected to receive $725,000.
Robert would have expected to receive $837,500.
They are all likely happy with these outcomes.