Three tips to avoid a disputed estate plan
These tips can help to better ensure a smooth transfer of assets.
Conflict over inheritance is not uncommon. There are proactive steps that can be taken to help reduce the risk of a disputed estate. Three examples include:
A carefully structured estate plan can meet these needs and better ensure the distribution of the estate moves forward without conflict.
Communicate your wishes with your heirs
Secrets about inheritance can lead to conflict. In many cases, it is wise to begin basic conversations when children are young. Even teenagers can benefit from knowing their family’s basic financial history. This discussion does not need to include the exact numbers or financial accounts. Instead, it can take the form of a story. How did you family gain its wealth? Did a grandparent immigrate from another country? Did you take an entrepreneurial risk that resulted in a successful business endeavor? Share these basics young to begin the conversation.
Once the children become adults, the conversation can shift. Again, exact numbers are not needed. The conversation can be simple: “We want all our children to split the inheritance equally,” or “we want this child to get a larger portion to help fund the medical needs that come with his or her disability.” Whatever your wishes are, spell out the basics to avoid surprises when the assets are distributed.
Document the reasons behind the bequests
You can further reduce the odds of a dispute with inclusion of additional documentation to explain the distribution of assets within the estate plan. This is sometimes referred to as an ethical will. An ethical will is particularly beneficial if an expected heir is disinherited.
The removal of an expected heir is not uncommon. Although not unheard of, the removal can lead to issues. Perhaps one child has had financial success while the other is struggling. It may make perfect sense to leave a larger bulk or the entirety of the assets to the struggling child. If the successful child does not know the reasoning behind this decision, he or she could believe the removal was done in error and contest the will. This risk can be mitigated by including the explanation within the ethical will.
Delegate responsibilities outside the family
Many estate plans include trusts. These legal documents allow the creator the ability to better control the distribution of assets. Trusts generally require the appointment of a trustee. This individual serves over the trust, working to ensure the goals of the trust are met.
It may be tempting to name a child, sibling, relative or close friend as a trustee. You must keep in mind that you are asking this individual to make difficult financial decisions. The decision made by this individual, although in line with the goal of the trust, may not be received well by the heirs. This can lead to an antagonistic relationship between the trustee and the other heirs. As such, it is often wise to hire someone removed from the family, like a corporate trustee, to serve in this role.