Far too many families end up fighting, or at least experiencing tension, over a family inheritance, but it does not have to be that way. Many families have worked through the details of divvying up a deceased relative’s property remarkably well and ended up even closer. Having counseled families for years, we offer the following advice to help you family avoid fighting over your property.
Be Open and Communicate With Family Members and Loved Ones
Hold a family meeting to discuss your final affairs and wishes. You do not necessarily need to discuss what and how much each person will be receiving, as that is always subject to change. You can, however, explain how you are dividing the property. If one person is getting a larger share than another, explain your reasons. Some may not agree with your rationale, but at least they will know why you made that decision. This can go a long way toward avoiding future litigation between siblings.
Write a Letter and Share it With Loved Ones
If you decide against a family meeting, another option is to write a letter carefully explaining your goals and wishes as they relate to your estate plan. In the letter, you can simply express your intentions in your own words without worrying about precise legal language. These letters are sometimes called letters of intent, a legacy letter, or an ethical will. This is especially important if you plan to leave a significant amount to a charity, organization, or a nonfamily member.
In order to ensure that your letter is not misunderstood, ask your attorney to review it. Your attorney can help ensure that you have not miscommunicated anything from would conflict with your plan. Keep in mind, this type of letter is not legally binding. However, it can be a good way to keep family informed about your intentions and to express your love and appreciation for family members and friends.
Settle on a Method for Personal Property Distribution
Many families find it helpful to discuss how personal property will be divided well ahead of a parent’s passing. Though many estate plans rely upon a personal property memorandum, it is not uncommon to discover a blank and unsigned memorandum. When this happens, most trusts and wills give discretion to the trustee or executor to distribute the property in equal shares to the beneficiaries. This often requires hiring an appraiser, holding an estate sale, and making equal distributions after the sale.
Some families have a much different sense of fairness, however, and would prefer to use a different method to divide property. For example, a trustee might allow each beneficiary to choose from a list of items in a rotating fashion. Alternatively, the family might have an auction where family members can bid with real money or play money that is doled out in equal shares before the auction. There are endless possibilities, and discussing the merits of the different options with family members can be an educational experience.
Review Your Estate Documents Regularly
In many instances, people discover that they either never fully understood what the content of their estate plan. It is important to review your estate planning documents frequently and write notes (just not on the documents themselves). These notes can help guide the discussion with your attorney. Call your attorney and request an explanation of that section and its impact on you and your family. If you attorney cannot give you an answer that you understand, you should consider working with an attorney who is better prepared. Preparation is key when it comes to helping you understand your documents and the impact they will have on you and your family.
Pay Close Attention to How Your Assets are Titled
A beautifully designed estate plan can fall apart if your assets are improperly titled. Be careful about jointly titling cash accounts and real estate. This is often done for convenience, but doing so can have some serious legal consequences. Aging parents often add a child to a bank account so that they can help pay bills. However, upon their passing, the entire value of the bank account will pass to the child rather than under the terms of the parent’s will or trust.
Check Beneficiary Designations
You should carefully examine beneficiary designations on life insurance and retirement accounts such as IRA and 401k accounts. This careful examination can ensure that they accord with your estate plan. In some cases, parents name a child or second spouse as the primary beneficiary of an insurance policy or retirement account. This is often done under the assumption that the will or trust will divide up the benefits according to the deceased’s wishes. This is not the case. In most jurisdictions, including Texas, the name listed on the beneficiary designation form will trump whatever the will or trust states. Beneficiary designations can have significant legal and tax consequences. Failing to properly update beneficiary designations can lead to surprising and often contentious results.
Spend More Time Together as a Family
Consider spending money to bring your loved ones together while you are still here. Many families have found that regularly funding a family vacation can strengthen relationships. Where good relationships exist, there is a much smaller change of contention between family members who value those relationships.
You have spent a lifetime acquiring property. The last thing you want is for that property to cause anger, resentment, or frustration among your loved ones. By following even one or two of these suggestions, you can make a huge difference in your legacy. A little effort now will pay big dividends when you are gone. Give us a call to schedule a time to speak with our attorney, Liz Nielsen.
Give Us a Call
Nielsen Law PLLC provides family focused estate planning to individuals and families in Austin, Round Rock, Cedar Park, and the Central Texas area. For more information and to learn about our firm, please contact us.