Battles over estates can exacerbate tensions among siblings
and tear families apart. But there are ways to significantly lessen the chances
that your heirs will battle one another. Doing the right kind of advance
planning can help avoid conflict. That includes consulting with your heirs or
getting your property appraised to ensure that the items you bequeath are
appropriately valued. Also, make sure you choose your executor wisely.
Roughly 70% of families lose a chunk of their inherited
wealth, mostly due to estate battles, according to research conducted over two
decades by the Williams Group, firm that helps families avoid such conflicts. The
fights aren't always about the money, either. It isn't uncommon for people to
spend more money on legal fees battling siblings or other family members than
they stand to inherit.
Here are some pointers for families to consider when
devising an estate plan.
Beyond Dollars and
Cents
Estate planners and other experts advise clients to think at
least as much about the nonfinancial aspects of dividing their property among
children and other heirs as they do about minimizing taxes.
A good place to start is deciding on what "fair"
means within the context of your family. A parent might decide to leave a
larger inheritance to an adult child who struggles financially and less money
to a child who has struck it rich on her own. A sick or disabled child might
need to inherit cash for long-term care but wouldn't find much use out of a
family vacation home.
Conversely, a parent might be reluctant to leave money
outright to a troubled or estranged child or believe they had given a child
enough money while alive to justify leaving nothing else to him in a will.
How to Prevent Fights
Communicating your wishes for who gets your personal
property and assets after you die and making them explicit in your will are
usually the best way to prevent a family feud, experts say.
First, make a list of your assets, including bank and
brokerage accounts, retirement savings and life insurance—and note who you have
named as the beneficiaries of those assets. Then add homes, big-ticket property
such as artwork, furniture, jewelry or expensive clothing and family heirlooms,
and consider who you want to inherit those items.
If a daughter is the beneficiary on a brokerage or
retirement account, giving a home or artwork of similar dollar value to a son
can help balance things out between them.
Experts say it's worth it to ask family members for their
input. You might have assumed your daughter wants the Steinway baby-grand piano
when she doesn't, or you might have thought nothing about a worthless box of
old holiday decorations while all three of your children are jockeying to claim
it for themselves.
Getting family input also gives you the chance to explain
your reasons for arranging lopsided inheritances while you are still alive and
can benefit from whatever parental authority you still have.
Consistency is important. If one in-law is allowed into the
decision-making circle, all of them should be, otherwise resentment between
siblings can brew. Listening only to the most vocal child and ignoring the
rest, or being unclear about how and why a certain decision was made regarding
money or property also can breed mistrust.
Alternative
Approaches
There are also some maneuvers you can make to even the
financial score among heirs.
Rather than itemizing who gets what in your will, a simple
way of dividing things up equally is to get your property and possessions
appraised and then have the children or grandchildren take turns choosing what
they want while you are still alive.
Conversely, you can set things up to allow family members to
bid on a coveted property after your death.
Life-insurance proceeds can also be used to compensate one
heir for getting less real property than another.
Choosing a Referee
The person you designate to distribute your assets and
belongings after your death is a key consideration—one that people often don't
think through. Often, the oldest child gets named executor by default, or two
adult children get named co-executors. Both situations can be a mistake if
there are smoldering sibling resentments.
It’s generally best to appoint a family member or trusted
outsider who isn't a beneficiary of the estate. That person can get paid by the
estate for his or her time in organizing papers and distributing the assets,
and can be a coolheaded referee for any inheritance disputes.
Making your intentions known directly to your would-be heirs
can also clear the air ahead of time so they won't erupt into internecine
conflict after you're gone—particularly in the tricky situation where one child
isn't going to get much money, if any.
Some people put a clause in their will that says an heir who
tries to contest it will get nothing. So-called no-contest phrases only work
well, however, when the heir in question has enough of a reason not to fight
it.
You should also detail in the will the reason why someone is
getting substantially less than others, or nothing at all. A child can be left out of a will as long as
the decision is intentional and made by someone of sound mind without being
influenced by someone else.
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