“In early 2022, Bloomberg News reported that Americans can expect to inherit $72.6 trillion over the next quarter century—more than twice as much as a decade ago. With so much potential generational wealth on the line, there is always a risk that it will become the subject of a dispute.”
Inheritance battles can create new conflicts, inflame long-standing resentments and squander assets intended to make heir’s lives better. What can families do to prevent estate battles when a loved one’s intentions aren’t accepted is the question asked by the recent article, “Warning Signs Of Estate Disputes—And Ways to Avoid Them,” from mondaq.com.
Here are the more common scenarios leading to family estate battles:
- Siblings who are always fighting over something
- Second or third marriages
- Disparate treatment of children, whether real or perceived
- Mental illness or additional issues
- Isolation or estrangement
- Economic hardship
There are steps to take to minimize, if not eliminate the likelihood of estate battles. The most important is to have an estate plan in place, including all the necessary documents to clearly indicate your wishes. You may want to include a letter of intent, which is not a legally enforceable document. However, it can support the wishes expressed in estate planning documents.
Update the Estate Plan. Does your estate plan still achieve the desired outcome? This is especially important if the family has experienced big changes to finances or relationships. An estate plan from ten years ago may not reflect current circumstances.
Make Distributions Now. For some families, giving with “warm hands” is a gratifying experience and can remove wealth from the estate to avoid battles as everything’s already been given away. The pleasure of seeing families enjoy the fruits of your labor is not to be underestimated, like a granddaughter who is able to buy a home of her own or an entrepreneurial loved one getting help in a business venture.
Appoint a Non-Family Member as a Trustee. Warring factions within a family are not likely to resolve things on their own, especially when cash is at stake. Appointing a family member as a trustee could cause them to become a lightning rod for all of the family’s tensions. Without the confidence of beneficiaries, accusations of self-dealing or an innocent mistake could lead to litigation. Removing the emotions by having a non-family member serve as a professional trustee can lessen suspicion and decrease the chances of legal disputes.
Communicate, with a facilitator, if necessary. Families with a history of disputes often do better when a professional is involved. Depending on the severity of the dynamics, this could range from annual meetings with an estate planning attorney to explain how the estate plan works and have discussions about the parent’s wishes to monthly meetings with a family counselor.
A No-Contest Clause. For some families, a no-contest clause in the will can head off any issues from the start. If people are especially litigious, however, this may not be enough to stop them from pursuing a case. An experienced estate planning attorney will be able to recommend the use of this provision, based on knowing the family and how much wealth is involved.
Addressing the problem now. The biggest mistake is to sweep the issue under the proverbial rug and “let them fight over it when I’m gone.” A better legacy is to address the problem of the family squabbles and know you’ve done the right thing.
As we head into the holiday season, efforts to bring families together and prepare for the future will allow parents, children and grandchildren to enjoy their time together.
Reference: mondaq.com (Nov. 4, 2022) “Warning Signs Of Estate Disputes—And Ways to Avoid Them”