Preventing Post-Death Disputes
An important part of the estate planning process is determining how you want your assets to be distributed when you die, but just as important is having a plan that helps to prevent or avoid conflicts between family members over your assets after your death. Such post-death disputes can be time-consuming, costly, and damaging to family relationships. An estate plan created with the help of an estate planning attorney ideally will be structured and include provisions that minimize or prevent the possibility of post-death disputes.
Situations that Increase the Risk of a Post-Death Dispute
Certain family structures and asset distribution choices can increase the risk of a post-death dispute, such as:
- Not treating children (or other like beneficiaries) equally.
- Disinheriting a family member.
- Being part of a blended family (children by prior relationships) or married couple with no children.
- Having a Will that leaves assets to a beneficiary in trust instead of to the beneficiary directly.
- Enabling some children to control their inheritance and others to not have this same control.
- Putting one child in charge of another child’s inheritance.
- Having family members who are generally inclined to complain, create problems, or take disputes to court.
- Failing to choose the right people (with appropriate successors) to serve in the various fiduciary positions, including Executors, Trustees, POA agents and health care agents under your Advance Directive for health care. In cases where an insufficient number of the right people exist to name in these fiduciary positions, failure to name an appropriate professional fiduciary, normally a Trust Company.
- Failing to have properly drafted and unambiguous estate planning documents.
Implications of Post-Death Disputes
Post-death disputes can be harmful, because they can result in full-blown litigation, cost a tremendous amount of time and money to resolve, dissipate the estate or trust assets, destroy relationships, and create permanent bitterness and resentment between the surviving family members. When considering your long-term legacy, avoiding this type of mayhem after you are gone is highly desirable.
However, there are often good and valid reasons that a person may need or want an estate plan that risks causing disputes, such as:
- Preventing a beneficiary who can’t or shouldn’t receive an outright inheritance from getting direct access to those assets
- Providing a larger share of inherited assets to a beneficiary who has greater needs than other beneficiaries
- Disinheriting an heir who has engaged in harmful behavior or become estranged
Ten Ways to Avoid or Reduce the Risk of Post-Death Disputes
- Engage an experienced estate planning attorney with extensive knowledge of wills, trusts, and the tax law. Such an attorney will be able to provide reliable advice on a wide range of planning options, and will also be able to document that you had the legal capacity to make decisions and were not under any undue influence or coercion when you signed your documents. Lack of legal capacity is frequently the purported basis of challenges to Wills and trusts by disgruntled family members.
- Carefully consider the details of the estate plan and anticipate any sources of dissension or disputes in advance. Details of a complete and effective estate plan include identifying the desired beneficiaries, identifying what portion of your assets (or specific assets) goes to which of those beneficiaries, and specifying how those assets will be distributed to those beneficiaries (directly or in trust). One of the important functions of an estate planning attorney is to assist the client in considering the pros and cons (including the risks) of any given estate plan, and what steps can be taken to avoid potential risks.
- Create documents that are clear and unambiguous. Ambiguous language in a Will, revocable living trust, or irrevocable trust can cause disputes that can result in expensive, time-consuming, and unpleasant court battles, especially when the ambiguous wording pertains to asset recipients, the extent of a distribution, or the conditions under which a bequest or distribution is to be made (for example, bequests that are conditioned upon a beneficiary’s remaining clean of illegal substances or completing a college degree). A good estate planning attorney can spot and avoid such issues with the use of clear, unambiguous language in the client’s estate planning documents. Estate planning documents deal with possible future events. Therefore, well drafted estate planning documents will contemplate possible future questions that may arise, and provide the answers to such possible questions within the estate planning documents.
- Ensure that legal documents are properly signed. Wills, trusts, and other estate-related legal documents, such as Georgia Power of Attorney forms and Georgia Advance Directives for Health Care, must be executed (signed) properly in order to be legally valid. Some documents require witnesses and/or notarization by a Notary Public. An estate planning attorney will typically supervise the signing of the documents, provide witnesses, and either act as or provide a notary public, so that each document is executed with all the legal formalities it requires. In addition to making sure all legal requirements are met, some estate planning attorneys may use additional techniques to help ensure that the document being executed cannot easily be altered later by a bad actor, such as having the testator of a Will or the Grantor of a trust initial each page. Some attorneys will also have the witnesses initial each page of a document, depending on the type of document being executed.
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Consider using a Revocable Living Trust instead of a Will as the primary estate planning instrument. A Will is meant to control any probate property that the person who made the Will (the “testator”) owns at the testator’s death. Probate property is any property that is not automatically transferred to a surviving joint owner or to a beneficiary named in a beneficiary designation at the testator’s death, and that is not owned in a trust (technically owned by the Trustee of a trust). If a testator has any probate property at the testator’s death, the testator’s Will must go through the probate process, so that an Executor can be formally appointed by the appropriate probate court. The Executor is the only person or entity who has the legal power to pay all debts, expenses, and taxes of an estate out of the estate’s assets, to control the estate’s assets, and to distribute the remaining assets in the estate to the “beneficiaries” of the estate (those who are to receive property or other benefits under the Will). During the probate of a Will in Georgia, the Will-maker’s (or “testator’s”) heirs[1] must receive notice that the testator’s Will is being offered for probate, and those heirs have the legal right to challenge the testator’s Will if they wish and try to have it, or parts of it, ruled invalid. If an heir would inherit more under the state’s intestacy laws than the heir would be receiving under the testator’s Will, then the heir has an incentive to try to challenge the Will. Even if such a challenge is ultimately unsuccessful, the litigation process can be long, expensive, time-consuming, aggravating, inconvenient, and relationship-damaging for all involved, so avoiding probate is generally seen as beneficial, especially in large counties where the probate courts are often overwhelmed and moving slowly through their caseloads. Also, since a Will must be filed as part of the appropriate probate court’s public record, its terms do not remain private.A revocable living trust (“RLT”), on the other hand, is a trust agreement that a person (the “Trustor” or “Grantor”) creates while that person is living. The trust agreement for an RLT names a “Trustee,” who becomes the legal owner of any property that the Trustor transfers into the trust and who has a fiduciary duty to manage the trust assets according to the terms of the trust agreement and any applicable state and federal law. Typically, the Trustor of an RLT is both the beneficiary and the Trustee of the RLT during the Trustor’s lifetime. The Trust Agreement for the RLT will also name one or more successor Trustees to administer the trust property upon the death, incapacity, or resignation of the original Trustee. Any property that is held in an RLT at the Trustor’s death does not have to go through the probate process. Instead, the successor Trustee of the RLT can quickly and efficiently take over the administration of the trust property without the need for any court action and continue to administer it under the terms of the trust agreement – whether that entails outright distributions to beneficiaries, the establishment of trusts for the beneficiaries, or some combination thereof.For these reasons, using an RLT and fully funding it during your lifetime (transferring as much of your property to that trust during your lifetime as is legally allowable and beneficial), can eliminate the need for your property to be controlled by a Will at your death, thereby avoiding the probate process and closing off the main avenue through which an unhappy heir can try to challenge your estate plan. Another benefit of using an RLT is that the Trust Agreement for an RLT, unlike a Will, does not have to be filed with a probate court as a public record, and can therefore be kept more private.Because of the different ways the law treats Wills vs Trusts, it is much more difficult for a disgruntled family member or heir to successfully challenge an RLT based estate plan. In general, while the disgruntled individual must prove something was wrong during the signing ceremony (fraud, undue influence, duress, forgery, or the like) to find a Will invalid, this is not necessarily the case with an RLT. To find an RLT invalid, the disgruntled individual must prove something was wrong every waking moment, from the moment of signing to the moment of death. If an issue existed during the signing ceremony, the trust creator (Trustor or Grantor) could simply terminate the RLT at any point in their life thereafter but did not do so. You end up with having to prove the Trustor’s signature was a forgery (Trustor never signed it), Trustor was incapacity when signed and this status never changed or a seriously egregious type of activity, such as the initial fraud or undue influence and then activities thereafter for life that prevented Trustor’s knowledge of the issue or termination of the RLT. Bottom line is that RLTs are much less likely to be found invalid, and because of this, are less likely to be litigated.
- Include In Terrorem clauses. An in terrorem clause is a provision typically found in a Will or trust that states that any beneficiary named under the document who attempts to dispute the validity or the terms of the document will lose any benefits that person would otherwise have received under that document. Admittedly, such provisions are not effective deterrents for an heir who is not also named as a beneficiary in the Will or trust, since that person does not stand to lose anything under the document. However, in terrorem clauses can be very effective to deter a beneficiary named in a Will or trust from challenging the distribution plan laid out in the document. Sometimes, it’s advisable for the testator of a Will or the Trustor of a trust to leave something to an heir who would otherwise be disinherited, for the sole purpose of having the in terrorem clause of the document apply to that person as a beneficiary. Depending on the size and nature of the bequest, it may be enough, in light of an applicable in terrorem clause, to deter the beneficiary from challenging the plan.
- Choose fiduciaries very carefully. Many post-death disputes arise from real or perceived mismanagement of assets. Choosing fiduciaries, such as the Executor of an estate or the Trustee of a trust, who will responsibly carry out the terms of the document is critical. Even with documents that are effective only during the document-maker’s lifetime, like a financial Power of Attorney (“POA”) or an Advance Directive for Health Care, it’s extremely important to choose financial agents and health care agents who can be trusted to carry out the document’s instructions and who will do so in a legal and ethical manner. It’s paramount to choose people or companies that take their fiduciary duties and responsibilities seriously and who would not misuse, mismanage, or appropriate assets for their own use and benefit, except as expressly allowed in the document.[2]
- Consider providing some benefits to an heir that you’d otherwise disinherit. As touched on above (see #6), one way to reduce the chance that an unhappy heir will challenge the terms of a Will or trust is to provide some level of benefit to that person, as an incentive not to challenge the terms of the document. In many cases, a post-death bequest or distribution can be made that is less painful than enduring the delays, expenses, and hassles that defending against a challenge would entail.
- Make sure that assets are titled correctly and that beneficiary designations are completed properly. Incorrect asset titling and beneficiary designations will typically override the terms of a Will or trust, can contradict and defeat the purposes of your estate planning, and can result in post-death disputes. A good estate planning attorney will advise you regarding how to title your property and set up your beneficiary designations to work in tandem with your Will or trust and to carry out your asset distribution desires as efficiently as possible.
- Communicate with beneficiaries in advance regarding wishes. Perhaps one of the best ways to avoid a possible post-death dispute is to communicate your wishes and intent clearly to family members in advance of your death, especially to those who may be unhappy about your estate plan. While it may be tempting to surprise a bad child with a disinheritance or a less-than-expected inheritance after you’re gone, such tactics tend to result in post-death disputes and court challenges much more often than the same plan when it’s not a surprise, and the people who will ultimately suffer from such tactics will be your intended beneficiaries.
Footnotes
[1] A person’s heirs are the people who would receive that person’s net probate estate assets if that person died with no valid Will. In Georgia, a person’s heirs will normally be the person’s surviving spouse, if any, and the person’s children, if all of the person’s children survive that person. If a deceased person has a child who does not survive but who has any children who survive the deceased person, then the deceased child’s own children would normally take the deceased child’s place as heirs, and so on. If a deceased person has no surviving spouse and no children (descendants), then that person’s parents will be the heirs, if either parent is then living; if there is no then-living parent, then the living siblings and the descendants, per stirpes, of the decedent’s then-deceased siblings will be next in line as heirs. If the decedent has no then-living spouse, descendants, parents, siblings, nieces, nephews, or descendants of nieces or nephews, then the decedent’s then-living grandparents will be next in line as heirs, and so forth.
[2] An example of an allowable form of self-benefiting by an agent under a POA would be a gift made by an agent who is expressly allowed under the terms of the POA to distribute gifts to himself or herself from the property of the person making the POA (the “Principal”). This may happen when the agent is the spouse or descendant of the Principal, and the POA allows the agent to distribute gifts to the Principal’s spouse and descendants.
