We have all seen it. The media likes to pass along juicy stories of actors that either had no wills or their heirs are fighting tooth and nail over the inheritance.
But how do we stop any infighting among our own beneficiaries when we pass? Most families get along great and would not expect issues when it comes to dealing with an estate. There are other families with mixed beneficiaries including kids, stepkids and non-family beneficiaries that could be at more risk for issues. The monetary and relationship toll could be huge if the parents are not careful in their approach to this matter. As attorneys who have practiced in the estate area for many years, we are continually surprised at the relational difficulties that an inheritance can create.
Here are some pitfalls and our suggestions that may help your beneficiaries weather the estate process more easily:
1. Second marriage with kids from prior marriages. In this case, having an estate plan in place (either wills or a trust) becomes critical to be sure assets go as the parents both wish. The estate documents should not only detail who gets what after both spouses die, but what happens upon the first spouse’s death (i.e., if they want the survivor to have full control of the assets and be allowed to make changes to beneficiaries, and how important it is to assure their own children still get a share of the estate if they happen to be the first spouse to die).
2. Unequal division of estates, or disinheriting a child entirely. This could be indicative of the relationship the parents and child maintained during their lifetime (i.e., the child and parent have no contact), or that one child has a lucrative career and the other is struggling, or there is an addiction involved. There are many reasons a parent may choose to do this, but without the parents around to explain their reasons, the children are left to create their own stories which can deepen any existing rivalry and create resentments among the beneficiaries. While each family is different, generally we recommend parents write a letter explaining their decision for an unequal distribution or for holding a beneficiary’s share in trust instead of providing it outright like the others, etc. This letter should be detailed enough so the affected beneficiary will understand their reasoning (even if they still don’t like it, at least they know why). The letter of course should only be guiding in tone, not legal, to avoid it being interpreted as a legal document. In the event of disinheritance, it is often recommended that something be left to the person being “cut out” so that they have something to lose should they challenge the documents in court.
3. Known issues with an estate. There are estates in which there are known existing relationship difficulties among beneficiaries. There are also situations in which particular assets in an estate may be difficult to divide easily. This can be a difficult situation for the executor/trustee to handle. The executor/trustee has a fiduciary duty to be as fair to all beneficiaries as possible. This means, therefore, that picking the right executor/trustee is critical to a smooth administration and minimizing relationship strain. Sometimes it may be wise to choose a professional fiduciary or trust company rather than put one of the children into that role. This is an important discussion to hold with our office or your estate attorney.
4. Disposition of personal property. If the parents want to designate who gets certain items of personal property, they need to provide a written, signed and dated list – and not just tell one of the children or put stickers on the back of the item.
5. Seek professional help both before and after death. Not only should clients seek professional advice when setting up their estate, but they should encourage the nominated executor/trustee to do the same when the time comes. It becomes even more important in light of assuring future relationships are not adversely affected.
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