When families fight over estate matters – whether a will is valid, who gets what property – heirs lose, and the lawyers needed to settle these disputes win. Understand what can cause problems after a person dies and what you can do to minimize or avoid them.
If a person dies without a will, it can mean chaos for the family. The probate process, which is the settling of the estate under court supervision, can be contentious and drag on much longer than if there had been a will. Where there is no will, state law (called intestate succession) effectively writes the will by dictating who inherits from the person. It is also necessary for a court to appoint someone (typically called an administrator) to manage the estate.
What to Do
Write a will. This is advisable even if a person doesn’t think there are sufficient assets to worry about. A last-minute lottery winning or a lawsuit (including a wrongful death case) can balloon the estate to impressive proportions.
Several transfer options can be used as will substitutes to ensure that property goes to the person the decedent intends. These include trusts, assets payable on death to a named beneficiary (e.g., an IRA or life insurance) and transfer-on-death accounts in banks and brokerage firms. However, even if you use will substitutes, it’s still advisable to have a will, just in case there are assets that have not been addressed by will substitutes. (Read more about why you should draft a will.)
Giving Control of the Estate to One Person
Being an executor of an estate is a powerful position. This is the person who amasses the property of the decedent, pays outstanding bills, files tax returns if needed and disburses what’s left. In the interim, the executor may invest assets and run a decedent’s business. Often, a person’s will names one person to act as executor. This can create jealousy among family members. For example, a parent may name the oldest of three siblings to this position. Or a husband may name a spouse and it happens to be a second marriage; the children from the first marriage may be wary of the spouse’s actions.
What to Do
The best strategy is to bring all parties together when you’re writing the will so everyone understands the person’s rationale for the appointments. For example, a parent may want one sibling, who is an accountant living in the same city as the parent, to serve as sole executor if the other siblings live a considerable distance away or are not financially sophisticated. (For the executor’s perspective, see 5 Surprising Hazards of Being an Executor.)
If a person does not want to disclose the appointment before death, then consider naming co-executors. For example, all siblings can be named as co-executors of a parent’s estate. Then, the siblings can agree whether they all want to serve after fully understanding an executor’s responsibilities. Or a spouse can name the surviving spouse and adult children as co-executors. This may be helpful where the children are from a prior marriage. (Read more about how to choose the right executor for your estate.)
Perceived Unfair Distributions
Perhaps the greatest discord results from the distribution of a decedent’s property. A parent gives the vacation home to the oldest sibling or leaves a valued piece of jewelry to the middle child.
What to Do
It is difficult to precisely equate inheritances, even assuming that this is the decedent’s desire. The reason: The value of assets fluctuates; a bequest of shares in X corporation may be worth $10,000 when the will was written, but is worth $100,000 or is valueless when the decedent dies.
However, family discussions about the person’s intentions can preempt discord after death. For example, it may make sense to leave the family business to the child who has been working in it and give other assets of approximately equal value to the child who is not involved in the business, using language to this effect in the will.
A letter of instruction, which is not legally binding but shows the decedent’s intentions, can be used to identify which personal items go to whom. The letter may say that the decedent’s daughter gets the brooch, and the son gets the living room furniture. (For related insight, read about letters of instruction.)
Under state law, spouses must be given an interest in an estate; you cannot disinherit a spouse unless the spouse has consented to this in a prenuptial agreement. However, state law does not require that anything go to children or anyone else. In fact, a parent need not even mention that he or she is disinheriting a child by not leaving the child anything. In other words, a parent may choose to give all of her property to one child and completely disinherit another.
When this type of disinheritance occurs, a child may contest the will by claiming the parent was incompetent to make the will, or that there was fraud or duress placed on the parent to disinherit the child. If the will contest is successful, then assets are distributed as if there were no will, as described earlier. Usually, this means that spouses get a share as do children of the decedent. If there is no spouse, then children inherit all in equal shares.
What to Do
Again, family discussions before writing a will can go a long way to preventing will contests later on. Perhaps a parent wants to disinherit a child because he is extremely wealthy and doesn’t need the inheritance while another child is struggling financially. It doesn’t hurt to add language in the will that explains the reason behind a disinheritance.
To avoid a will contest, you can include a non-contestability clause in the will (in legalese it’s an in terrorem clause). This provides that if a person who has been named in the will contests it and loses the contest, he or she also loses any bequest in the will. If the person isn’t named in the will, there’s nothing to risk.
The Bottom Line
Communication and planning for one’s estate can go a long way in avoiding fights among family members when someone dies. Work with an attorney who can offer solutions to potential problems unique to your situation.