Avoid These 2 Common Causes for Dispute Over Your Estate Plan — Part 1

Let's be honest, most families have disagreements, disputes, or just plain drama even in the best of times, so when you're considering what will happen to your estate when you die or if you become incapacitated, why leave it up to chance? This quick read can help you avoid uncomfortable family dynamics even if you're not around to play peacemaker. 

No one wants to believe their family would ever end up battling one another in court over inheritance issues or a loved one’s life-saving medical treatment, but we see it all the time. This is especially true for those who rely on do-it-yourself estate planning documents found online. (You may think that most lawyers would try to convince you to do otherwise, but did you know that many lawyers actually love those online platforms?? Estate administration is a very lucrative hourly billing model, and the worse the documents, the more it costs your family to fix after you die! I would rather you get the guidance to do it correctly the first time.) 

The good news is you can dramatically reduce the odds of such conflict by enlisting my support to assist you in creating your estate plan and explaining that plan to your family members. Even the best set of documents will be unable to anticipate and navigate the complex emotional dynamics that make up your life and family, but having a real person in your corner can!  

In this quick read, I'm going to walk you through what most families fight about so yours won't have to! 

Fiduciaries

Many estate planning disputes happen when the person you’ve chosen to handle your affairs following your death or incapacity doesn't do what they were supposed to do. Whether it’s as your power of attorney agent, executor, or trustee, these roles can entail a variety of different duties, some of which can last for years. 

The person you select, known as a fiduciary, is legally required to execute those duties and act in the best interests of the beneficiaries named in your plan. The failure to do either of those things, is considered a breach of fiduciary duty.  

The breach can be the result of the person’s deliberate action, or it could be something they do by mistake. Either way, a breach—or even the perception of one—can cause serious conflict among your loved ones. This is especially true if the fiduciary attempts to use the position for personal gain, or if the improper actions negatively impact the beneficiaries.  

Common breaches include failing to provide required accounting and tax information to beneficiaries, improperly using estate or trust assets for the fiduciary’s personal benefit, making improper distributions (like paying heirs before bills), and failing to pay taxes, debts, and/or expenses owed by the estate or trust. 

If a suspected breach occurs, beneficiaries can sue to have the fiduciary removed, recover any damages they incurred, and even recover punitive damages if the breach was committed out of malice or fraud. If you are named as the fiduciary on a loved one's plan, you need to know this too - those mistakes can come out of your own pocket. 

Solution

Given the potentially huge responsibilities involved, you need to be extremely careful when selecting your fiduciaries, and make sure everyone in your family knows why you chose the fiduciary you did. You should only choose the most honest, trustworthy, and diligent individuals, and also be careful not to select those who might have potential conflicts of interest with beneficiaries.  

Moreover, your planning documents have to contain clear terms spelling out a fiduciary’s responsibilities and duties, so they understand exactly what’s expected of them. And should things go awry, you can add terms to your plan that allow beneficiaries to remove and replace a fiduciary without going to court. 

Additionally, I always recommend (which we can talk about more in your Family Wealth Planning Session) that your fiduciary is not the same person as the guardian or your minor children. That way, your children are not put in a situation to have monetary disputes with the person/people who are also raising them from day to day. This is something I'm very passionate about and am more than happy and willing to help you select the most qualified fiduciaries; drafting the most precise, explicit, and understandable terms in all of your planning documents; as well as ensuring that your family understands your choices by meeting with them and you together, so they do not end up in conflict when it’s too late. In this way, the individuals you select to carry out your wishes will have the best chances of doing so successfully—and with as little conflict as possible.  

Next week, we’ll continue with part two in this series discussing common causes for dispute over estate planning.