Major assets can be a complicating factor when you try to establish a comprehensive estate plan. It’s possible that no one has an emotional attachment to a valuable item, like a luxury vehicle or an unoccupied piece of land, possibly held as an investment, making it hard to allocate.
Instead of arbitrarily choosing someone to assign these assets to, the better approach may be to request that the executor or administrator of your estate liquidate certain assets and distribute the final value of the estate evenly among heirs and beneficiaries.
Whenever the approach you take in estate planning involves the sale or liquidation of assets, you may want to include clauses that offer the right of first refusal to certain people in your family.
What is the right of first refusal?
Frequently, contracts that include clauses about the right of first refusal will involve a real estate transaction, such as a rental agreement. The landlord may specifically note in their lease that before they list a property rented by a tenant for sale, the tenant will have the opportunity to make a fair market value offer on the property.
Including a right of first refusal clause in your estate plan regarding certain valuable assets will work essentially the same way. You will have to designate assets and specific people. In some cases, you can even establish the hierarchy, where first your oldest child has the opportunity, then the second oldest and so on.
Other times, there may just be one person in your family whom you believe would like to retain certain assets. Offering them the right of first refusal gives them the opportunity to retain assets that have an emotional value without skewing the estate plan in their favor.
Language requiring fair market value offers can help protect your legacy
If the individual who has the right of first refusal is close to the person who serves as the executor for your estate, they might potentially negotiate an offer that is well below what the executor could secure for the property if they sold it on the open market. Not only does that offer one person an unfair opportunity, but it also diminishes the overall value of the estate you leave behind.
Requiring the executor to establish a fair market value for any substantial assets that heirs or beneficiaries could have the opportunity to purchase through first right of refusal clauses protects everyone from insider dealing and other unscrupulous actions.