In a recent meeting with a select group of estate planning professionals, probate specialist, Peter Wright of Sirote & Permutt P.C., outlined a number of issues that increase the frequency of lawsuits after the death of a family member. Here a few of the more common areas of concern:
Poor family communication. In Peter’s experience, by far the number one cause of family strife is poor communication between family members. In my own experience, parents often are ‘mum’ when it comes to discussing their personal finances and wills with children. Often their philosophy is, “We’ll let them sort it out after our death”…rather than confront potential sensitive issues while they are living. This usually arises where there is an unequal distribution to children or where inheritance is left in trust. In working with our clients, we orchestrate a meeting of the parents and adult children, called The Family Council, to discuss the key issues around the family estate plan as well as the ‘why’s’ of any trusts being created under the parents estate plan. We have found out that if there are going to be problems, it’s better to deal with them while the parents are alive.
Unequal distributions. There may be cases where there are good reasons for ‘unequal’ distributions to children. For example, if part of your estate includes a family business, often there are children who are involved in running the business while others are not involved. The goals of active versus non-active owners are often at odds with each other so it often makes sense to will the business to the children who are running the business and attempt to ‘equalize’ the distribution by giving other assets of equal value to the children not involved in the business. This never turns out ‘equal’ so it’s vital that parents communicate their intentions and get buy-in from all the children.
We were involved in a case where one child was very successful financially while another child required constant financial help. The parents felt that it was fair to give the ‘successful’ child a disproportionate share of their estate at death because the other child received much of his inheritance during life. Because the parents communicated their intentions to both children, it avoided dissention at their deaths.
In many cases, equalizing the distributions can easily be resolved by purchasing life insurance.
Diminished capacity. My mother passed away from Alzheimer’s disease. Over a five year period I watched her go from full capacity to incapacity. There are a lot of cases where children file lawsuits after the death of a parent alleging incapacity, especially where the parent made changes to their will. Peter Wright suggested that parents consider having their physician validate capacity when they make major changes to their will. In a similar vein, many lawsuits arise based on ‘undue influence’, where one child alleges that another child ‘talked’ the parent into changing their will to favor that child. To minimize the risk of litigation, Peter suggests again expressing in the will document why the changes were made and consider fortifying your case by having a disinterested third party specifically discuss the changes with the parent making the will and also serve as a witness to the actual execution of the will.
Disinheritance. I’ve seen a number of cases where a parent decides to disinherit a child only to have that child file a lawsuit against the estate. Many of these cases ‘settle’ by giving the disinherited child money in order to avoid costly and time-consuming litigation. Peter suggests that the parent should not only state in their will that they are explicitly disinheriting the child, but also explain ‘why’ that child is being disinherited.
One child provides care of a parent. There are many cases where as a parent’s health diminishes, one child steps up and accepts responsibility for the care of that parent. What begins as a labor of love often quickly turns into a lot of hard work…for which there is no compensation, or worse, a lot of out-of-pocket expenses. This often leads to resentment. Here, it’s important that all of the children come together and agree on what’s fair. Suggestions include keeping detailed records of money spent on behalf of the parent to be reimbursed either from the parent’s funds during their life or from their estate at death. You may also want to consider a ‘time and duty’ log whereby you keep up with your time and duties performed and agree on fair compensation for the work performed.
These are just a few of the typical scenarios that can give rise to dissention and litigation at the death of a parent. The most effective estate plans include input from a team of professionals including your estate attorney, Certified Financial Planner, Chartered Life Underwriter, CPA and trust officer…and lots of communication with children!