Ask a group of friends if they have experienced a family fight over property after a loved one has died, and you will be in for a lively and eye-opening conversation. Far too many families end up fighting, or at least experiencing tension, over a family inheritance. But it does not have to be that way. Many families have worked through the details of divvying up a deceased loved one’s property remarkably well and ended up even closer. Having counseled families for years, we offer the following pearls of wisdom to help your family avoid fighting over your property when you are gone:
Be open and communicate with family members and loved ones. Hold a family meeting to discuss your final affairs and wishes. You do not necessarily need to discuss what and how much each person will be receiving, as that is always subject to change by you. You can, however, explain how you are dividing the property. If one person is getting a larger share than another, explain your reasons. Some may not agree with your rationale, but at least they will know that you made the decision and why. This can go a long way toward avoiding future litigation between siblings.
Write a letter and share it with loved ones. If the idea of a family meeting strikes terror into your heart because you envision sibling rivalries flaring up, it may be better to write a letter carefully explaining your goals and wishes as they relate to your estate plan. In the letter, you can simply express your intentions in your own words without worrying about precise legal language. This is especially important if you plan to leave a significant amount to a charity or other organization or to a non-family member. If you worry that your letter will be misunderstood, you can ask your lawyer to review it against your estate plan to make sure you have not miscommunicated anything that would conflict with your plan. Even though this type of letter (sometimes called a letter of intent, legacy letter, or an ethical will) is not legally binding in the same way that your estate planning documents are, it can be very helpful to keep family informed about your intentions and to express your love and appreciation for family members and friends.
Settle on a method for personal property distribution. Many families find it very helpful to discuss how personal property will be divided well ahead of a parent’s passing. Though many estate plans rely upon a personal property memorandum to detail distributions of personal property, it is not uncommon to discover a memorandum blank and unsigned after a parent’s death. When this happens, most trusts and wills give discretion to the trustee or executor to distribute the property in equal shares to the beneficiaries. This often requires hiring an appraiser, holding an estate sale, and making equal distributions after the sale. Some families have a much different sense of what is fair, however, and would prefer to use a different method for dividing personal property. For example, a trustee might allow each beneficiary to choose from a list of items in a rotating fashion. Alternatively, the family might have an auction where family members can bid with real money or play money that is doled out in equal shares before the auction. There are endless possibilities, and discussing the merits of the different options with family members can be an educational and even entertaining experience.
Review your estate documents regularly. In many instances, people discover that they either never fully understood what was in their estate planning documents or have forgotten what they included. Thus, it is very important to review your estate planning documents frequently and write your questions or concerns (on sticky notes, not on the documents themselves!) in your estate planning binder for discussion with your attorney as soon as possible. If you do not understand a section of your estate planning documents, do not ignore it. Call your attorney and request an explanation of that section and its impact on you and your family. If your attorney cannot or will not give you an answer that you understand, you should consider working with an attorney who is better prepared to help you understand your documents and the impact they will have on you and your family.
Pay close attention to how your assets are titled. A litany of horror stories exists about beautifully designed estate plans that fell apart because assets were titled improperly (i.e., in the wrong name). Be careful about jointly titling cash accounts and real estate. This is often done for convenience, for example, when an aging parent wants to add a child to the parent’s bank account so the child can help pay bills. Doing so can have serious legal consequences, however, as the entire value of the bank account will then pass to the child rather than under the terms of the parent’s will or trust.
Check beneficiary designations. You should carefully examine beneficiary designations on life insurance and retirement accounts such as IRA and 401k accounts to ensure that they accord with your estate plan. In some cases, parents name an oldest child, second spouse, or no one as the primary beneficiary of an insurance policy or retirement account, assuming that the will or trust will divide up the benefits according to the deceased’s wishes. This is not the case. In most jurisdictions, the name listed on the beneficiary designation form will trump whatever the will or trust states. Beneficiary designations can also have significant legal and tax consequences. It is crucial that you work with a knowledgeable estate planning attorney to help you determine how best to name beneficiaries for your insurance and retirement accounts. Failing to do so can lead to surprising and often contentious results.
Spend more time together as a family. Consider using a portion of the money that you would otherwise leave to your loved ones to bring them together while you are still here. Many families have found that regularly funding a family vacation or getaway, a cruise, or even a family heritage tour (to Ireland or Africa, for example, to gain an appreciation for family roots) can strengthen relationships and create lasting positive memories for the entire family. Where good relationships exist, there is much less chance of contention between family members who value those relationships.
You have spent a lifetime acquiring your property. The last thing you want is for that property to be the cause of anger, resentment, and frustration among your loved ones. By following even one or two of these suggestions, you can make a huge difference in your legacy. A little effort now can pay big dividends when you are gone. For more information, please do not hesitate to give us a call at 937-589-4144. We are available for in-person and virtual meetings.