Estate Administration Red Flags of Impending Litigation

Court battles can devastate an inheritance with litigation costs. Early awareness of the possibility of trouble can help you head it off. Time and again these circumstances lead to expensive conflicts. You can avoid estate battles with early recognition. If your estate has any of these factors then special attention needs to be paid before conflicts erupt.

1. Second marriages. If the decedent was remarried then the new spouse who is not the parent of the children and a stranger to the original family, enters the picture. In a well planned estate this presents no difficulties. But often times the estate plan fails to contemplate the intervening rights of the new spouse and expectations can be seriously disappointed. For example, even if the will leaves everything to the children a spouse can renounce the will and take a statutory share. The rules are complex. Be aware that there may be a problem and prepare for it.

2. A parent who owns assets jointly with one of the children. Joint tenancy is a popular inexpensive way to avoid probate but creates more problems that it solves. Since jointly owned assets pass to the surviving joint tenant automatically this often raises suspicions of undue influence. However, it is often done as a convenience so that the affairs of an elderly parent can be taken care of. Parents often trust the caretaker child to equally divide the assets after death but the extra responsibilities of the caretaker child often incline him or her to retain the assets and deny that any such assurances were given. Even if the child wants to divide the assets equally with the siblings, gift tax laws make it difficult to do so without creating problems in the estate of the caretaker child. Proper living trust planning solves these conflicts and removes suspicions when a parent is in declining health.

3. Children with different personal financial circumstances. The interest that children have in the estate can vary greatly depending on their own circumstances. Even if the terms of the plan are undisputed a child who is wealthy in their own right will not be in as much of a hurry for distribution as one who is a starving artist. Sensitivity to these varying circumstances of the children is essential for a smooth administration.

4. A family business that does not involve all of the children. If one of the children is involved in running the family business but the plan equally divides the business among all the children then this will inevitably create problems. The children who do not run the business will be more concerned with distribution of profits whereas the managing child will be more interested in reinvesting revenues to grow the business. These situations can be the source of great frustration and conflict if the family dynamics are not immediately addressed.

5. A parent who lacks mental capacity and one child has power of attorney. Powers of attorney are regarded as “blank checks.” They empower the power holder (called the “agent”) to do basically anything the principal could have done if he were present. They can be very useful but because of the wide open authority they are unfortunately often abused. Lawsuits are often filed in order to set aside transfers the agent made.

6. A meddling daughter- or son-in-law. In-laws have no inherent right to the deceased’s estate. They are not heirs. Unless they are named as administrators, or beneficiaries they have no rights with respect to the deceased’s estate. This does not mean they won’t try to influence the administration.

7. Excluding a child as beneficiary. If the deceased has become estranged from a child the will or trust may make provision for the children except for the disinherited child. This is perfectly legal if done correctly. There is no right to inherit (except for a surviving spouse in some instances). However, disinheriting a child may bring upon the estate a contest if the parent’s intentions were not made clear.

Moreover, when a parent disinherits a child, the grandchildren are often substituted as beneficiary. This means that that if the child contests the estate he or she is brought into conflict with his or her own children.

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