From Esau, who rashly traded his birthright to his twin brother Jacob for a cup of soup, to King Lear’s ill-conceived plan to leave his riches to only two out of three daughters, family dynamics can lead to estate problems.
Any one — or more — of the following six situations can easily lead to a court battle for control if the scenarios are not properly addressed during the estate planning process:
1. Multiple marriages with children from current and previous relationships.
2. An elderly widow or widower who changes the disposition of wealth shortly before death.
3. Significant wealth, including a family business.
4. A dysfunctional family.
5. A tyrannical or incompetent executor.
6. An antagonist who is more concerned with his or her own objectives than the decedent’s wishes.
The family of the Grateful Dead’s Jerry Garcia checked nearly all of the above boxes.
Upon his death in 1995, Garcia left his possessions to a widow, three daughters by two ex-wives, a fourth daughter by a former girlfriend and a stepdaughter, as well as other beneficiaries. He named his widow executor of his complicated estate that included various business interests, which turned out to be a terrible decision because she had an axe to grind with the ex-wives. A previous post on these issues can be found here.
Garcia might have avoided the resulting legal chaos had he taken these steps:
Work with a trusted adviser. Select an adviser with whom you can frankly discuss family issues — including conflicts, jealousies and special needs — that could interfere with the settlement of the estate. Being honest with an estate planner about family dynamics can help head off disputes before they start.
Thoroughly document your wishes. Spelling out your intentions in legally enforceable documents — a will, health care proxy, power of attorney or trusts, for example — is extremely important, especially in the event your beneficiaries take their disputes to court after your death or if you make what turn out to be last-minute changes to your estate plan. Also put in writing your wishes regarding funeral or memorial arrangements; disagreements over decisions to be made during this emotional time can spark larger arguments.
Choose an executor wisely. The individual or individuals charged with administering your estate will have to interact productively with your beneficiaries. Can your prospective executors would work well together and be able to deal with any family issues that might surface? Do they have the right skills to work with attorneys, accountants and financial planners; to administer a complex estate; and to deal with family?
Be clear about bequests to spouses and children. In the situation with multiple marriages and children from more than one relationship, the surviving spouse, children and stepchildren may have different expectations about what they’re entitled to from an estate. Decisions about what should be left to each beneficiary, the timing of the distributions and the estate tax implications should include these considerations:
- The financial needs and ages of the children and current spouse, and the estate tax implications of making bequests to them.
- The length of the current marriage, prenuptial agreement terms and whether any children were born to the marriage.
- The relationships with children from prior relationships.
- The health of spouse and children, and their abilities to manage money.
- The potential need to hold assets in a spousal trust or distribute outright to the spouse, or to hold assets for children in a discretionary trust or age-terminating trust or distribute outright.
- Whether assets are titled consistent with the terms of the will.