No matter how well you know your loved ones, it is impossible to predict exactly how they will behave when you pass away or if you become incapacitated. No one wants to believe that their family members would ever end up fighting one another in court over inheritance issues or a loved one’s life-saving medical treatment, but the fact is, we see it all the time.
Family dynamics can be complicated and prone to conflict even during the best of times. Yet when tragedy strikes a member of the household, even minor tensions and disagreements can explode into bitter conflict. And when access to money (or even quite often, sentimental items of furniture or jewelry) is on the line, the potential for discord is exponentially increased. Ultimately, there is no greater cost to families than the cost of lost relationships after the death or incapacity of a loved one.
The good news is you can dramatically reduce the chances for conflict in your family by working with an experienced estate planning lawyer, who understands and can anticipate these dynamics. By becoming aware of some of the leading causes of conflict over your estate plan, you are in a better position to prevent those situations through effective planning. Though it is impossible to predict how your loved ones will react to your estate plan, the following issues are among the most common conflicts:
Poor Fiduciary Selection
Many estate planning disputes occur when the person you have selected to handle your affairs following your death or incapacity fails to properly carry out his or her responsibilities. Whether it is your power of attorney agent, healthcare agent, executor, or trustee, these roles can entail a variety of different duties (some of which may last for years).
The individual you select, known as a fiduciary, is legally required to execute those duties and act in the best interests of the beneficiaries named in your plan. Their failure to do either of those things is referred to as a breach of fiduciary duty.
The breach can be the result of the person’s deliberate action, or it could be something they do unintentionally by mistake. Either way, a breach—or even the perception of one—can cause real and understandable conflict between your loved ones. This is especially true if the fiduciary attempts to use the position for personal gain, or if the improper actions negatively impact the beneficiaries.
Common breaches include failing to provide required accounting and tax information to beneficiaries, improperly using estate or trust assets for the fiduciary’s personal benefit, making improper distributions, and failing to pay taxes, debts, and expenses owed by the estate or trust.
If a suspected breach occurs, beneficiaries can sue to have the fiduciary removed, recover any damages they incurred, and even recover punitive damages if the breach was committed out of malice or fraud.
Solution: Given the significant responsibilities involved, you must be mindful when selecting fiduciaries. It is a good idea to make sure everyone in your family knows why you chose the person you did, and that the person you choose knows how to do the job—and do it well. You should only choose the most honest, trustworthy, and diligent individuals, and be careful not to select those who might have potential conflicts of interest with beneficiaries.
Furthermore, it is important that your estate planning documents contain clear terms spelling out a fiduciary’s responsibilities and duties, so the individual understands exactly what is expected of him or her. There is also flexibility to add terms to your plan allowing beneficiaries to remove and replace a fiduciary without going to court should things go awry.
As your Life & Legacy Attorney, we can assist you with selecting the most qualified fiduciaries; drafting the most precise, explicit, and understandable terms in all of your planning documents; as well as ensuring that your family understands your choices, so they do not end up in the conflict when it is too late. This way the individuals you select to carry out your wishes will have the best chances of doing so successfully—and with as little conflict as possible.
Contesting The Validity of Wills and Trusts
The validity of your will or trust can be contested in court for a few different reasons. If such a contest is successful, the court may declare your will or trust invalid (or certain parts of it), which effectively means the document (or the part of it that the court deems invalid) never existed. This could potentially be unpleasant for everyone involved, especially your intended beneficiaries.
However, just because someone disagrees with what they received in your will or trust does not mean that person can contest it. One of the ways to discourage people from contesting your will or trust is to include a “no contest” clause. This type of clause effectively penalizes a person for attempting to go against your wishes. Whether or not the individual agrees with the terms of your plan is irrelevant—it is your plan after all.
Solution: There are times when family members might contest your will or trust over legitimate concerns, such as if they believe you were tricked or coerced into changing your plan by an unscrupulous lover or caregiver. However, that is not what we are addressing here.
Here, we are addressing—and seeking to prevent—contests that are attempts by disgruntled family members or would-be beneficiaries seeking to improve the benefit they receive through your plan. We are also seeking to prevent contests that are a result of disputes between members of blended families, particularly those that arise between spouses and children from a previous relationship.
Some of the leading reasons for unhappiness include having a plan that benefits some children more than others, as well as when your plan benefits friends, unmarried domestic partners, or other individuals instead of, or in addition to, your family. Conflict is also likely when you name a third-party trustee to manage an adult beneficiary’s inheritance to prevent them from being negatively affected by the sudden windfall.
In these cases, it is vital that your plan is properly created and maintained to ensure these individuals will not have any legal ground to contest your will or trust. One way you can do this is to include clear language that you are making the choices laid out in the plan of your own free will, so no one will be able to challenge your wishes by claiming your incapacity or duress.
Beyond having a sound plan in place, it is also important to clearly communicate your intentions to everyone affected by your will or trust while you are still alive, rather than having them learn about it when you are no longer around. We often recommend holding a family meeting (which we can help facilitate) to go over the estate plan and various fiduciary roles with all impacted parties.
Blended Families Increase Likelihood Of Conflict Outside of contests originated by disgruntled loved ones, the potential for your will or trust to cause dispute is significantly increased if you have a blended family. If you are in a second (or subsequent) marriage, with children from a prior relationship, your children and spouse often have conflicting interests, which can lead to conflict.
Solution: To reduce the likelihood of dispute, your estate plan must contain clear and unambiguous terms spelling out the beneficiaries’ exact rights, along with the rights and responsibilities of executors, trustees, and other fiduciaries. Such precise terms help ensure all parties are clear about your intentions.
Additionally, if you have a blended family, it is essential that you meet with all affected parties while you are still alive (and of sound mind) to clearly explain your wishes. Sharing your intentions and hopes for the future with your new spouse and children from a prior relationship is an important key to avoiding disagreements over your wishes for them. When it comes to inheriting your estate, your new spouse and your children from a prior marriage have inherently conflicting interests. For one, if your new spouse inherits everything you have when you die, your children from a prior marriage could receive nothing when your new spouse dies. This is unless you have planned in advance to ensure your assets are held in trust for your new spouse to be used during his or her lifetime, and then stipulated that the balance should mandatorily pass to your children upon your spouse’s death.
A potential problem with this is that the children will have to wait until the surviving spouse passes away to receive their inheritance. A way to avoid this is by making specific gifts to your children at your death, then they inherit the rest later at intervals or at the death of the surviving spouse. Either way, you want to avoid inadvertently disinheriting them (unless that is your express wish).
Prevent Disputes Before They Happen
The best way to deal with estate planning disputes is to do everything possible to avoid them in the first place. This means working with us to put planning strategies in place aimed at anticipating and avoiding common sources of conflict. It also means consistently reviewing and updating your plan to keep pace with your changing circumstances, changing laws, and changing family dynamics.
Whether the potential dispute arises from disgruntled heirs, sibling rivalries, or the conflicting interests of members of your blended family, we are specifically trained to predict and prevent such conflicts. Meet with us today to learn more.
This article is a service of Reflections Life Planning LLC. We do not just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Family Wealth Planning Session™, during which you will get more financially organized than you’ve ever been before and make all the best choices for the people you love. You can begin by calling our office today to schedule a Family Wealth Planning Session and mention this article to find out how to get this $750 session at no charge.