Singer-songwriter Prince died a little more than a year ago, and while many fans are still mourning his loss, it’s likely that several estate-planning attorneys working his case feel they’ve won the lottery.
That’s because Prince died without a will, and the estate settlement battles are just beginning.
And while celebrity estate battles make great headlines, similar feuds often occur in the typical American family because there was no estate plan.
Here are some points to consider to help avoid family conflicts:
Complex family dynamics
These days, with multiple marriages, children from those marriages, siblings, step-siblings or family estrangements, it does not take long for a family dynamic to get complex.
With complexity comes the potential for family members unhappy with what they inherit to contest a will, resulting in long and messy court battles.
Planning for complex families is now the norm, not the exception.
A written estate plan is crucial
A well-documented estate plan can help avoid potential family conflicts. Yet, according to a March 2017 survey by BMO Wealth Management, 56 percent of people age 35-54 don’t have a will in place.
The usual reasons are the fear of dying and wanting to avoid conflicts from the planning process. However, to avoid conflicts down the road, it’s best to document where you want your assets to go now, and to communicate those intentions to heirs, rather than have them interpreted incorrectly later on.
Warren Buffett once said, “Your children are going to read the will someday. ... It’s crazy for them to read it for the first time after you’re dead. You’re not in a position to answer questions.”
Estate planners will tell you that fair doesn’t always have to mean equal. While leaving each child an equal share sounds fair, each family’s circumstances are different, such as a special needs child who can’t provide for himself.
And how each heir inherits may also be important: Some can handle an outright distribution, but others might need to inherit in trust, so there is a gatekeeper to help protect themselves.
It isn’t always the high-value assets that cause feuds among heirs; it’s dealing with how family heirlooms should be divided. (See “Who Gets Grandma’s Yellow Pie Plate?” at http://www.extension.umn.edu/family/personal-finance/who-gets-grandmas-yellow-pie-plate/). Working that out prior to death could also help keep peace in the family.
▪ Consider updating estate documents after significant life events, such as marriage, divorce, birth of a child, etc.
▪ Consider using a corporate executor or appoint an impartial agent to assist a family member executor.
▪ Tell your executor where to find your estate documents when needed.
▪ Document any charitable intentions and let heirs know they won’t be inheriting your entire estate – for their own planning purposes.
▪ Consider obtaining life insurance to help heirs and with costs of estate settlement.
▪ Don’t delay estate planning until you are too ill or mentally incapacitated to deal with it. The potential for conflict – or being taken advantage of – can grow as a parent without mental capacity ages.
When creating/updating estate documents, it’s always good to use a legal professional who will work with your tax and financial planning advisers to ensure all aspects of the financial picture are considered – and to help avoid future family conflicts.