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How should I think about the following scenario?

There is an estate of $100,000 plus an automobile valued at $5000. There are two beneficiaries, A and B, each to receive 50% of the estate assets. Beneficiary A also wants the automobile and will 'pay' for it from their share of the estate.

A quick answer would be 'A gets $45,000 and B gets $55,000'... But I think that would be incorrect. A is not paying B $5,000, they are paying the estate, which is split.

A slightly more thought out answer would be 'A gets $47,500 and B gets $52,500", effectively cutting in half the amount A is paying for the car.

Are there any other, more correct answers?

BobT
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5 Answers5

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Just add it all up. The assets in the estate are worth $105,000. Splitting that equally means that each beneficiary gets $52,500. The one who gets the car gets a car worth $5000 and the rest in cash, $47,500. The other one gets all cash, $52,500.

Pete Becker
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  • This is a good, simple way of looking at it. I think my confusion arose from the fact that A is paying the estate, so is 'only' paying $2500. Looking at the relative gain/loss between A and B makes it clearer... – BobT Nov 26 '18 at 14:13
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The second one is correct.

One way of getting there is that A simply buys the car from the executor of the estate for $5000. The estate is now $105000.

The estate gets split two ways, with A and B each getting $52500.

Simon B
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Yet another way of looking at it (they all essentially amount to the same) is that:

  • The total estate is valued at $105,000 ($100,000 cash + $5,000 car).
  • Give the car to A and match it with $5,000 cash to B.
  • That leaves $95,000 of cash in the estate, or $47,500 to each of A and B.
  • A receives a total value of $52,500 ($5,000 car + $47,500).
  • B receives a total value of $52,500 (all cash).
  • Double-check: $52,500 + $52,500 = $105,000 which matches the original size of the estate.
TripeHound
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A and B split the liquid assets. The value of non liquid assets is determined by the executor of the estate. If no executor then A and B must determine and agree on the value.

If A wants the asset, he pays half the value to B (either directly or out of the amount to be received from the estate) which would be your second scenario 'A gets $47,500 and B gets $52,500'.

Bob Baerker
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  • That was the answer I settled on, but the more I thought about it the more I was unsure... – BobT Nov 25 '18 at 22:33
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The other answers have already given you the correct result and methodology.

Here's another way of calculating the difference without having to take into account the entire estate.

The value of the car given to A is $5000, so B is short 5k. To amend that, A gives B money. Each dollar given from A to B amends the discrepancy by two, since it adds one to the lesser and subtracts one from the greater. So, A needs to give B the difference / 2.

To verify, you can check the equality (A) $5000-$2500 = (B) $2500

bxk21
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  • Thanks for the answer. Actually, the estate is short $5000, and B is short $2500. When all is said and done there will be a $5000 difference between the total distributions given to A and B. – BobT Dec 14 '18 at 17:59
  • The estate isn't in this calculation. I'm talking about getting A and B equal. – bxk21 Dec 14 '18 at 18:00