This is a hypothetical...

Outside of the fact that there may be no inheritance to be had, prior to the death of the parents can two siblings write up a contract so that sibling #1 is entitled to sibling #2's inheritance provided sibling #1 meets the terms of payment?

Example: sibling #1 wishes to provide $1500/mo payments to sibling #2 for 20 years and sibling #2 relinquishes all rights to his/her inheritance.

Sure.

sure.

example. dad dies and leaves two sons a farm. son A wants it, and son B wants to live in the city, so son A takes the farm and makes payments to son B, buying his half from him. etc.

honestly its pretty common IMHO, farms, homes, businesses, cabins, boats, trucks, etc.

OP is talking pre- death

I don't know why not
But i also think it'd be stupid.

Yes, but dumb. What happens if #1 reneges on payments? #2 goes to court and begins a family feud, or forgets it and loses out their part.

and what if the parents balk and do an end around your arrangement for fairness?  Ie an irrevocable trust for the indebted child.  

Moms tend to take care of their dumber or more unfortunate children.  

My mom would often give money, pay bills for, pay vacations for broke children and infrequently borrow money from the not financially hamstrung children to cover her own needs.  Yea she would give her money away to the irresponsible and then hit up the responsible.  It would puss me off because a couple of my sisters were blowing their money on stupid stuff then cry poverty to mom.  

I finally had a talk about substitution of funds with my mom.  Yea, I figured it our, I was lending money that ended up going to my sisters that my mom was repaying.  They of course never paid her back.  

What if parents find out and decide to give sibling #2 inheritance to the Hari Krishna's?

What if parents win Powerball after contract is written and then die and sibling #2 wants inheritance?

fail potential is strong with this one.

Or parents could get long-term illnesses and end up in debt from medical bills by the time they pass away.

You don't think the contract could be written as such that failure to pay made the deal null & void?

And why does everybody think it's stupid? Does it carry risks? Absolutely! But sometimes the risk is worth the reward. It was an acquaintance that proposed it to me. His brother isn't the best with money but wants to start a business. His parents are worth around $5M and growing. He asked me the viability of such a deal, either via lump sum or monthly payments. I don't blame him, pay a few hundred thousand now for what could be several million down the road. I don't know how serious he was but I didn't really know how to answer bc I think the contract would have to be written pretty well bullet-proof to protect from the parents going around the deal. The parents should probably be aware and at least somewhat supportive. But that would still leave the risk that the finances are drained when the time comes. I could see some parents intentionally draining accounts on lavish vacations and such just to make it more fair. All those risks are understood, he just didn't know if there were any other gotchas. I wondered if a judge would uphold such agreements if sibling #2 cried to the courts that it wasn't fair etc.


I know anyone can sue for any reason, this was actually my main concern. Can a contract be written in such a way that #2 has no chance of winning if he/she changes his/her mind and suing for his/her half when the time comes?

For the purposes of this hypothetical I'm up for discussing any possibility but I don't think the acquaintance's situation would have that potential. His parents have no living persons they could inherit anything from and they don't gamble. The real concern is that they operate 3 very successful businesses so their worth will only grow. Sibling #2 wants nothing to do with those businesses and wants to start his own. Sibling #1 wants to continue those businesses and already owns half of one. He is concerned that sibling #2 would force a liquidation or sale because he just wants the money. So he wants to buy that sibling out now to solidify the future of the businesses.

Sure.

It would be much easier for the parents to have the businesses completely transferred to sibling #1 after they retire but before they pass away, and thus the businesses would not be part of their estate.

A much better option would be a single premium immediate annuity (SPIA).

Take the money, pay it as a single premium to an insurance company offering annuities. Based on your age and such things (as determined on the contract), the company pays you a set amount every month the rest of your life.

OP's example is basically a version of one sibling providing an annuity to the other one. I would very much NOT involve siblings in such a deal. Too much to go wrong.

The assets of the businesses are 95% of the estate, so that would be pretty much cutting sibling #2 out of the inheritance. Sibling #2 would get the modest house, used cars, and personal property worth $1/4M...

The majority of the assets are real estate. Loss of that real estate would cripple 2 of the businesses (the 2 he doesn't have joint ownership of).

And yes, I realize that the best advice for him is to talk to his parents about plans on how best to transition operation of the businesses smoothly to sibling #1 while protecting the interests of both siblings. I think he was venting to me a bit because he has tried that to no avail (for many years). His parents are apathetic about estate planning, they have openly admitted that their will hasn't been updated since the kids were toddlers and they were dirt poor (the kids are now grown with their own kids). The parents admit it needs done and they plan to do it when they get around to it (they've been planning to get around to it for several years). He is concerned that if they never get around to it all the sweat equity poured into growing these businesses will be lost. Although he works full-time for them he doesn't get paid from the 2 businesses that he doesn't share ownership of, he has side income to supplement the income from the one joint business and his wife works too, they're barely scraping by while the parent's net worth increases rapidly, partially from his efforts. This is just his latest thought on how he can protect himself. The parents are already eligible for retirement and SS benefits. His father, who holds all the cards, has already outlived his siblings by more than a decade. He feels the clock is ticking to get things figured out.

I normally lend him an ear and offer up thoughts on difficult life matters. This was one I didn't have much advice on bc I didn't even know if it was possible... the parents know that he needs compensation for his time but most of the earnings get poured back into business capital instead. He is ok with that as long as there is some surety that the increase in capital is attributed to him and he reaps the benefits when the time comes. I don't think the parents would be opposed to the plan to buy out sibling #2's inheritance but I think more so, he's hoping that such a proposal to his parents and sibling will finally get them to stop talking about some estate planning and start DOING some planning.