In early 2022, Bloomberg News reported that Americans can expect to inherit $72.6 trillion over the next quarter century—more than twice as much as a decade ago. With so much potential generational wealth on the line, there is always a risk that it will become the subject of a dispute.
These disputes can create new conflicts, inflame old ones, and squander assets that were supposed to make people's lives better. So what, if anything, can you do to prevent family members from fighting over your assets?
While there are no guarantees, several actions may reduce the chances of a dispute. A good first step is to consider whether your situation involves one of the more common scenarios that push families into court.
- Feuding siblings: This may be the most common dispute scenario.
- Second or third marriages: Parents often remarry, which can create complicated family dynamics.
- Disparate treatment: Problems often arise when a parent treats children unequally, or when someone perceives parents have favored one of their children. Tensions can also escalate when someone anticipates an estate plan may give someone preferential treatment.
- Mental illness or addiction issues: These issues, which seem more acute since the pandemic, have the potential to create instability and must be addressed carefully.
- Isolation: When someone is estranged from a family, excluded from a family business, or lives in a different area, he or she may be more prone to make demands.
- Economic hardship: A family member facing difficult economic circumstances may try to take advantage of elderly parents, which can lead to elder abuse.
What can you do if one or more of these situations applies to your family? The most effective action depends largely on your goals and the personalities of those involved. Your estate planner can help you anticipate disputes and to try to avert them. Here are some options:
- Update Your Plan: Many people have wills or trusts to document their estate plan. It is critical, however, to revisit these documents periodically to ensure they can still accomplish the desired outcome, especially when there are changes to financial or familial circumstances (e.g., death of other family members, divorce, birth of a child, or a change in financial status). Moreover, people are living longer than earlier generations. As families change, estate plans need to change too. If the pandemic has altered the health, employment status, or composition of your family, does your estate plan need to address those changes?
- Give it Away (Now!): Because people are living longer, many children are nearing retirement when they inherit from their parents. Some parents choose to transfer their assets while they are still alive. It may make more sense and be more cost effective (and satisfying) to distribute assets while you are still living.
- Appoint Non-Family as Trustees: Disputes are more likely to arise if a family member acts as a Trustee without the confidence of beneficiaries. Real or perceived self-dealing, as well as a lack of transparency, often fuel suspicion and increase the chances for legal disputes.
- Talk About it: Children often incorrectly assume assets will be distributed equally among siblings. Discussing your plans with your family gives them time to understand your motivations, accept your intentions, and maybe defuse any disappointment. This approach, however, may also provoke immediate disputes or lobbying efforts to make changes. You should think carefully before discussing these issues, and anticipate how folks may react.
Originally published July 27, 2022
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.