Oftentimes when I meet with clients desiring to do estate planning, little thought is given by the client to how smoothly the processing of their estate will go after they are gone. So here are a few things to keep in mind as you begin the estate planning process.
First, you’ll need to take some common sense measures.
Confirming Your State of Mind. The most common argument a family member will make when disputing a will or trust is that the writer, or testator, was not of sound mind. Based upon your age or medical condition, consider having your doctor and a psychologist evaluate your physical and mental health just before finalizing your will, so that you can avoid this allegation.
Separate Legal Counsel. If your family has business affairs or complex legal arrangements, seek your own legal counsel, separate from other family members to protect your interests and the interests of those you wish to give gifts to.
Corporate Fiduciary. Consider hiring a corporate entity to serve as executor or trustee instead of family members. Corporate executors or trustees are less likely to be seen as abusing their fiduciary powers; whereas a stepparent or favored child may unwittingly cause suspicion or jealousy among your other heirs. Corporate fiduciaries typically charge a fee, but this can be a small price to pay to avoid disharmony and potential litigation.
Distribution. Try not to play favorites. The general rule here is to ensure that all of your children and/or your spouse are treated equally. There’s not much room for argument when three children each get 1/3 of the house, business, or other property. If you distribute some of your property while you are still living, have legal documentation reflecting what you gave or sold to your heirs and make it clear whether those are to be offset against any bequests in your will or trust.
Disinheritance. Make your intentions clear by defining which people will not inherit property, or which will get smaller shares of your estate. Avoid the whys and wherefores – these only encourage bad feelings and potential contests. I have found that it also helps if you communicate your intentions to those who appear to be receiving less than others while you are living. Communicating this in a family meeting and on several occasions is ideal, as long as it does not seem to be “rubbing it in.”
Business & Property Contracts. If you have a business, particularly one that is doing well, you should have a buy-sell agreement prepared that provides for how ownership and management will occur when you die. This is a critical document that many businesses fail to prepare and often causes the collapse of the business when one of the owners dies. These documents can also provide how withdrawal of one or more owners will be handled even if death is not involved.
No Contest Clauses. These clauses provide that beneficiaries or heirs who challenge a will forfeit their inheritance. Such clauses have been the subject of legal challenges in many jurisdictions and may have limited or no effect in particular states and situations. However, they may still provide enough question that a beneficiary or heir will think twice before filing a legal challenge to your will or trust.
I hope these thoughts will give you some ideas to think about as you begin your estate planning or think about updating your plans. If you have questions, contact your estate planning attorney.