Judd Matsunaga
Will your family fight over your estate after you are gone? That’s a scary thought. Unfortunately, courts are often filled with brothers and sisters fighting over their parents’ estate. Such disputes can lead to prolonged and costly legal battles. Perhaps worse, the pain, bitterness and resentment from this kind of division may never go away.
If keeping peace in your family is near the top of the list of estate planning goals, you’re not alone. Every parent hopes their family will remain close even after they are gone. So, with some thoughtful planning, parents can prevent sibling disputes, ensuring that your children will still get together for Thanksgiving, New Year’s Day and other family celebrations long after you’re gone.
There are a number of ways to maximize the possibility that your family will remain conflict-free after you die. In this article, I have three tips to help you get that done: (1) give equally; (2) give equitably; and (3) have a family meeting.
GIVE ‘EQUALLY’
If your goal is to minimize conflicts between your children, then you should consider dividing your estate “equally.” Throughout their lives, your children have likely heard you say, “I love all my children equally.” Therefore, it’s quite likely that your children might assume they will all get an “equal” share of your estate. So, the simplest solution is to divide whatever you have equally among your children.
During your lifetime, parents can make gifts to children or directly pay for things like a college education or family vacation. However, for the sake of peace and harmony after death, it’s important to think about keeping things equal because you won’t be around to explain things after you’re gone. You can instruct your successor trustee to sell everything and then distribute the proceeds equally among your beneficiaries.
Also, parents should never divide an indivisible asset in hopes that it will bring their heirs together. Instead, give the house, the vacation property, the land or the business to just one child and make up the difference with a monetary share for the others. Alternatively, stipulate that all the assets be sold, and divide the proceeds equally. If a child really wants a specific asset, he or she can have the option to buy the others out.
GIVE ‘EQUITABLY’
There are many reasons why parents might opt for another option. An equal split might have been fair a generation or two ago when parents died in their 60s and 70s. But today, parents are living well into their 90s and even 100s. An equal split doesn’t seem quite fair when the bulk of caregiving responsibilities (especially those latter years) fall on one child.
According to a Merrill Lynch study, two-thirds of Americans believe that under certain circumstances, an uneven split is the right way to go. For instance, a child who steps in as primary caregiver for an aging mom or dad deserves to inherit more than other siblings. Also, nearly 1 in 4 of those surveyed said a child with their own children deserves more money than a child who does not have kids.
Another possible exception to equal distribution is if there’s an estranged child that you want to disinherit. This is legally permissible, i.e., there’s no law that says you have to give to all your children equally. However, equally is what happens if you die “intestate” (without a will or trust). If that’s your wish, make sure you seek legal advice to avoid legal challenges by the disinherited child.
Some other possible exceptions are: (1) you have a child with a gambling or drug addiction; (2) you have a child who is financially irresponsible; or (3) you have a child on Medicaid or some other public benefit program in which inheriting money might disqualify them for government assistance.
HAVE A FAMILY MEETING
The “traditional” estate planning model was to reveal the estate plan upon death, e.g., we have all seen the movies where the family gathers to hear the reading of the will. This, however, will often lead to fighting over the parent’s estate in court.
One of the best weapons you have against conflict, in all areas of life, is communication. There are times when the worst thing you can do is “blindside” a child after death. If they aren’t inheriting as much as they expect, it’s only fair to let them know the truth before you die. If you are leaving unequal shares, many estate planning attorneys describe “communicating the plan” as the final step in the estate planning process.
The modern approach is to have a “Family Meeting” after finalizing the estate plan. When they understand your reasons for making certain decisions and they hear them directly from you, you avoid one sibling blaming another. By conducting a Family Meeting, the potential for misunderstandings, family objections, confusion, delays and loss of control is greatly reduced.
So, once you have figured out how you want your money and possessions distributed after you die and you have incorporated those directions in your estate plan, it’s time for a Family Meeting to communicate your intentions with your children. This allows family members and fiduciaries to understand the plan and ask questions of you and/or your professional advisers.
Experience suggests that ONLY the children/heirs be present for the Family Meeting. This is not just my experience but is found in nearly any book or guide on dividing. Sibling rivalries or tensions are hard enough to deal with in the face of loss; adding personalities and people perceived as “outside the direct family” participating in choices can create tensions and conflict easily avoided by keeping it only to the heirs.
In-law spouses, not being direct family members, can sometimes complicate estate and trust matters by exerting influence over a spouse who is a direct beneficiary, especially if they are “whispering in the ear” of such direct beneficiary spouse. In cases of unresolvable disagreement, consider bringing in an outside professional — whether a banker, financial planner or lawyer. That outside professional acts as the rational person in the room who doesn’t have a dog in the fight.
Having a neutral third-party professional communicate your plan’s intent and mechanics to the family members and fiduciaries in your presence of the client is a powerful tool to help avoid family bitterness and resentment. A Family Meeting is designed to flush out and deal with potential family problems and disputes in advance. If one family dispute can be avoided, the family might save hundreds of thousands of dollars in legal fees incurred in an unnecessary will or trust contest.
Judd Matsunaga is the founding attorney of Elder Law Services of California, a law firm that specializes in Medi-Cal Planning, Estate Planning and Probate. He can be contacted at (310) 348-2995 or judd@elderlawcalifornia.com. The opinions expressed in this article are the author’s own and do not necessarily reflect the view of the Pacific Citizen or constitute legal or tax advice and should not be treated as such.
