While we all would like to believe that our family members will all get along after we are gone, unfortunately estate disputes are all too common. While some lawsuits relating to estates and probate are disputes about large sums of money, many of these lawsuits relate to modest-sized estates or small items of personal property. Even if your family gets along fabulously now, there is always the potential for conflict down the road, however by recognizing a few simple issues you may be able to reduce or completely avoid these situations.
Any estate may be subject to dispute, but there are some specific situations that may create a greater potential for disputes. For example, if you have remarried and have children from a prior marriage your estate may be subject to more scrutiny from your family. In addition, if your children do not get along with each other during your lifetime, it is more likely that they will dispute issues regarding your estate. Whether or not one of the situations mentioned above exist in your family there are some measures you can take to reduce the potential for conflicts between your family members.
Ways to Reduce Potential Disputes Regarding Your Estate
Don’t Put Off Estate Planning
Estate planning is a process that requires careful thought and consideration. Do not wait until you are faced with an illness, traveling out of the country, or dealing with potential capacity issues. Take some time to review and create an estate plan that addresses your unique situation while you still clearly have the capacity and health to make sound decisions.
Perhaps more importantly, clearly communicate your intentions with your family both during your lifetime and in your will or trust. If you talk to your spouse and children about your wishes during your lifetime you may be able to address, or event prevent, potential disputes that may arise with the distribution of your estate. Clear communication and planning can also provide you with the peace of mind that you may spare your family from conflicts or hurt feelings.
Make Sure Your Beneficiary Designations are Up-To-Date
It is also critical to review your beneficiary designations to ensure that the proper beneficiaries are named, and the beneficiary designations fit within your overall estate plan. Remember, a beneficiary designation can take precedent over a will, so keeping your beneficiary designations updated to reflect your current life situation is essential.
Specifically Recognize Any Lifetime Gifts or Loans in Your Will or Trust
If you loan money to one of your children, or give gifts during your lifetime, make sure that you recognize the loan or gift in your will or trust. Be specific about whether the loan is to be forgiven or repaid at your death. Additionally, document any loans or gifts you make during your lifetime, in writing, with the use of promissory notes, contracts, or other document, so that your intent is clear.
Be Specific About Personal Property
While most people may be more focused on the distribution of financial assets and real estate in their will or trust, personal property can often create more problems and disputes than larger assets. With that in mind, include a specific “Personal Property Memorandum” to attach to your will or trust, or include a specific provision directly in your will or trust that sets out the distribution of your personal property. This not only includes personal property with high monetary value, such as jewelry or art, but also any personal property that has family or sentimental value, or simply may cause an argument in your family.
Create a Revocable Living Trust to Avoid Probate
A revocable living trust is an estate planning tool that can eliminate the need for the probate administration process. If you have a trust in place, so long as you properly transfer title of your assets to your trust, probate will not be required for your estate. Probate is a public process, which requires filing an inventory and accounting of your assets. While the purpose of a probate proceeding is intended to be administrative rather than adversarial in nature, probate does provide a forum for heirs to contest terms of your will or dispute with other heirs and beneficiaries. Revocable living trusts are private documents not subject to probate proceedings, so the use of a trust can help to reduce the potential for conflict surrounding your estate.
Appoint a Neutral Trustee or Personal Representative
Instead of appointing your spouse or a child as the trustee or personal representative for your estate, consider appointing an institutional trustee such as your bank’s trust department, or professional fiduciary. A professional or institutional fiduciary is not subject to the same family pressures and can provide neutral management of your estate. While professional fiduciary may not be familiar with your family dynamics and can be a bit more impersonal, this approach can be quite advantageous in providing neutral administration and reducing conflict.
If You Intend to Disinherit Someone Clearly Explain Your Decision in Your Will or Trust
If you want to disinherit a family member, especially if it is a child, very clearly explain in your will or trust your intent to disinherit your child. List the individual by name and give a brief explanation of why you intend to disinherit him or her. However, don’t go overboard in your explanation and make sure that your reason for disinheriting the individual is not easily challenged or against public policy.
Communicate Your Intentions and Seek Professional Advice
These are some of the techniques available to reduce disputes and conflicts regarding your estate. By implementing some of these strategies and discussing an overall plan with your family that addresses any potential disputes or inequity problems, you may be able to avoid a dispute.
Your particular estate may have estate tax or other considerations, so seek the professional advice of your attorney, CPA or financial planner. Your advisers may also have additional ideas to help reduce conflicts based on your personal and family situation.