You may choose from two types of trusts when planning your estate: revocable or irrevocable.…
Organize Your Estate Plan to Minimize Conflict Among Heirs
Minor and adult children may have different opinions about family circumstances, especially when it comes to inheriting the estate. It is normal for relationships to change and intensify when someone you love dies, as underlying issues can come to the surface, causing tension over the estate and possibly tearing your family apart. Although your children might get along well, dividing your assets may require conflict resolution skills. When your estate settles, even close siblings can struggle to maintain happy family relationships without having previously experienced significant conflicts.
While you are younger and mentally fit, proactive planning can drastically reduce family conflict and infighting among your heirs. During these next two decades, vast sums of inheritable assets in the US will transfer from the Silent Generation and Baby Boomers in the realm of 30 to 68 trillion dollars to their adult children. Wealth management groups estimate that roughly 70 percent of these families will lose a sizeable chunk of their inheritance due to estate battles.
Yet sibling conflicts are not limited to money. There are always stories of heirs fighting over a piano, valuable artwork and jewelry, sentimental items, and even baseball card collections as they vie for a perceived edge of inheritance. Situations may occur where fighting families spend more on legal fees in court litigation than the actual worth of what the other heirs stand to inherit.
The easiest way to avoid infighting is to speak to your children directly to manage their expectations about your estate plan and receive their input. You can’t honestly know what your heirs prefer to hold on to once you are gone unless you ask. These family discussions need to include all heirs equally because if one heir gets a say about what they inherit, so should all.
At the same time, these conversations can be difficult because an equal division is not always possible depending on the asset. Additionally, some well-off heirs may want more sentimental items or family collections rather than cash as it might change their tax bracket. In contrast, the less well-off heirs can genuinely benefit from additional monies.
If your plan is for unequal distributions of your estate and you opt not to discuss it with your heirs while you are living, include explanatory language in your estate plan as to how you came to your decisions to help your heirs understand your goals and minimize conflict. Your estate planning attorney can also communicate to your family why being fair is not always the same as being equal.
To reduce the potential for conflict in your estate plan, do not name joint personal representatives (executors) or joint trustees. Administering probate, trusts, and your estate with just one person accountable for the final decisions in each legal entity will simplify your heirs’ interactions. Simply because an heir is the oldest or of a certain gender does not qualify them to administer your estate. In fact, all of your heirs may not be suitable to serve in these roles, in which case a neutral third party needs to be appointed.
A neutral third-party entity can be a trust company or bank that can execute your wishes without family participation in decision making. For those who worry an heir may squander generational wealth, a discretionary trust administered by a neutral third party enables you to provide for your beneficiary without worrying about the money going to waste.
Finally, keeping your estate plan updated with your estate planning attorney reduces the likelihood that an heir will contest your will or trust. Major life events like death, divorce, or remarriage requires an immediate re-evaluation of your estate plans. Even if your family is not prone to conflict, managing heirs’ expectations and a sound, routinely reviewed estate plan can prevent a bitter legal battle that can tear your family apart.
If you have questions or would like to discuss your estate planning situation, please contact our Heber Springs, Arkansas office at 501-365-3934.