Ways to Secure Your Estate Plan

April 20, 2023

Estate planning isn’t just for the rich and famous. For example, you may have family heirlooms (such as jewelry or artwork) or real property that has sentimental value to certain family members. Wills and trusts can help ensure that your estate is divvied up fairly after your passing. But you won’t be around to explain or interpret your estate plan when it’s triggered. So, your will and other estate planning documents should be as clear as possible to help ensure your intentions are honored.

Here are some strategies to consider when drafting or revising your estate plan that can help minimize future disputes over your estate.

Treat Heirs Equitably

If your heirs contest your will or trust, it may be tossed out of court. That means your estate will be distributed per the laws of “intestate succession” — as if there’s no will or trust in place. However, if your will or trust follows the applicable laws closely, there’s less likelihood your heirs could successfully contest it.

For example, a will that calls for shares of an estate to be split equally between the decedent’s children, including any stepchildren, seems fair and aligns with applicable laws. Therefore, it’s unlikely that an heir could contest this will.

But this strategy may not be fair or equitable in all situations. For instance, suppose you have a son from your current marriage who’s a college student and a daughter from a previous marriage who’s financially independent. Your son needs more financial assistance, so he might not think it’s fair to divide your estate equally between the siblings who are at different stages of life.

Explain Your Plan

Warren Buffet once described his philosophy for leaving the correct amount to children as, “Enough money so that they … feel they could do anything, but not so much that they could do nothing.”

Whatever your rationale is for dividing the estate, to avoid disputes or disappointment, it’s a good idea to describe your thinking to your family while you’re still alive. For example, if you leave a child out of your will because he or she is financially independent, the individual might contest the will, arguing that the omission was an oversight. However, your intentions will be clear if you explicitly describe them.

The caveat is that you should be careful about the reasons for disinheriting an individual. If you argue that you’re taking this step because he or she is “financially independent,” the definition of the term can be a reason to litigate.

Thwart Challenges to Your Mental Capacity

When wills are contested, the suits often claim undue influence or lack of testamentary capacity. Typically, states have an age requirement, usually 18 years old, and a mental capacity requirement.

To demonstrate you’re “of sound mind and body” in a legal context, you generally must know:

  • The nature/extent of property,
  • The natural objects of your property,
  • The disposition that your will makes, and
  • How to connect these elements to form a coherent estate plan.

Three common ways to avoid challenges to your testamentary capacity include:

  1.  Acquiring a written evaluation by a physician or psychiatrist,
  2. Selecting witnesses who can attest to your mental capacity and are likely to out-live you, and
  3. Possibly recording your will.

With the third option, be aware that if you appear nervous or hesitant in front of the camera, the court could perceive it as a sign of confusion or duress. Consult with your attorney about this action.

Hire a Professional Executor

Traditionally, the executor of an estate is a trusted child, friend, trustee or personal representative. However, this may open the door to abuse-of-power claims.

To decrease the likelihood of these arguments, consider using an independent, paid professional. Typically, people select their family attorney, CPA or financial advisor, but you can also use an institutional fiduciary, such as a bank or trust company.

For More Information

These are just a few examples of the numerous strategies you can deploy to guard your estate plan against misunderstanding and possible litigation. Your estate planning attorney will help design an estate plan that meets your goals while reducing the risk of litigation.

Property valuationsWhat If You Own a Family Business?

If you own a family business, you may be considering leaving it to children (or other loved ones) who are active in its day-to-day operations. But your will might not be the optimal tool for transferring private business interests. Instead, you might consider selling the business to heirs who are actively involved while you’re still alive. This can help eliminate the risk of another heir contesting your will, which could leave your business in limbo.

In general, disgruntled heirs will have a more difficult time challenging a lifetime sales contract than a bequest in your will. Your financial and legal advisors can help you with options for a lifetime sale, including installment sales and sales to intentionally defective grantor trusts. These plans can spread the payments over numerous years while minimizing the tax impact.

Learn more from our accounting partners at HBE, at: https://hbecpa.com/ways-to-secure-your-estate-plan/