I always tell my clients, colleagues & friends, that the estate they leave behind for their loved ones, becomes a family business whether it was planned to be or not.
This new “business unit” or your “estate” will have many issues that these “new shareholders” will face. We know they will not be trained for this new stage and role in life. Jennifer Black, my colleague, has beautifully laid out everything in the article below.
This article is courtesy of Jennifer Black, DFS Private Wealth.
Conflicts in Your Estate
What conflicts can affect an estate?
Several types of conflicts can arise during the settling of your estate. First, your beneficiaries might not agree with the way you have divided your assets and may fight for a larger share of possession of certain items. Second, people who have been “left out” of your will may petition for a share. Third, some beneficiaries may perceive a conflict of interest if the executor also benefits from the estate. Fourth, property owned by you but used by the whole family, such as a cottage, is a prime target for conflict. It’s even possible for the laws of different jurisdictions to be in conflict if, for example, it’s not clear where the deceased truly lives because they had several residences.
It is worth noting that estate disputes are the fastest-growing area of litigation. These battles can destroy a family.
Avoiding estate conflicts
The best way to avoid as much conflict as possible is to have an up-to-date, clear, detailed legal will. Beyond that, it makes a lot of sense to meet with your family and explain what’s in your will and why you have made those choices. Openness and understanding go a long way to reducing discord. If you have a meeting, you can make sure everyone understands and your family members have the opportunity to ask questions and state their preferences (for example, does son Bob want dad’s watch or his university ring? What does son Joe want? Does daughter Mary want mom’s ring or her pearls? And daughter Jane?). This way, your family can come to resolutions before you pass on. The meeting could also illuminate areas where your will needs to be clearer, or reveal topics you did not adequately address in your will.
Your choice of executor is important. This person has a huge responsibility and needs the knowledge, time, ability and sometimes force of character necessary to help prevent family conflict as they carry out their duties. Do not simply select your eldest child or sibling without truly considering whether that person is equipped for the job. The choice of executor often causes conflict because some people view it as a badge of preference awarded by the deceased. So it’s best if you have a chance to explain your decision. If this is likely to be a minefield for your family, consider hiring a trust company or lawyer to do the job.
These conversations can be difficult and may involve conflict, the very thing you’re trying to avoid, but the conflict will be worse if you leave it all until after you’re gone.
In addition to the questions of who gets what that are usually dealt with in a will, talk with your family about your end-of-life preferences, appoint a power of attorney for personal care and have your lawyer formalize the arrangement. That way, if you are incapacitated your family will not be arguing among themselves and with your doctors about what you would have wanted in terms of care.
Conflicts of Interest
It is entirely legal – and very common – for an estate’s executor to also be a beneficiary; for example, an adult child administering a parent’s estate. But it can cause a perceived conflict of interest when it comes time to compensate the executor. It may appear to some beneficiaries that the executor is benefiting unfairly from the estate. Again, the solution is to discuss with your family why you have made your choices and then spell them out in your will.
It’s possible for different – and potentially conflicting – laws to govern different parts of your estate; for example, if you own property in another country. If this is the case, you will likely need to appoint an additional executor where the property is located to ensure that local laws are followed. It often makes more sense to have a second will to deal with the foreign property. Laws regarding joint ownership and probate may be different in different jurisdictions as well, so consult a local lawyer to ensure that your will is not in conflict with local laws.
Alternative Dispute Resolution
Even with careful planning, you may not be able to prevent all conflict after your death. But you can help your family stay out of court if you specify in your will that if a dispute arises, those involved should employ alternative dispute resolution, which can save your heirs and your estate money and distress. Alternative dispute resolution strategies include negotiation, mediation and arbitration. Your will can describe the process you wish conflicting parties to use.
Structuring a will to prevent family conflict is not something you can do alone. Talk to your family, and then meet with your lawyer and an estate planning expert to ensure that your decisions are enshrined in you will.
To contact Jennifer Black: DFS Private Wealth, Phone: 905-896-8373, Email: email@example.com, Website: www.dfsprivatewealth.com