Avoiding Estate Planning Conflicts among Heirs

Most estate planners and their clients don’t focus enough on avoiding conflicts. I don’t mean the obvious conflict of leaving money to the estate planner or having a major beneficiary prepare the will. What’s more important are the ways an estate plan can create conflicts among the heirs or continue existing conflicts.

Here’s a good piece by a couple of CPAs that explains key ways to avoid estate planning conflicts. The authors list a number of ways to avoid conflicts and litigation among the heirs, many of which have appeared in Retirement Watch in the past, including the rarely-considered suggestion to avoid trying to be evenhanded or treat everyone equally.

• Overcome the concept of fairness. One of the most common issues is when parents try to be “fair” in order to ensure their children get along. In this situation, the parents are also typically trying to protect and keep the legacy asset, whether it is a business or a home, in the family and on a growth trajectory. If one sibling is invested and interested in the family business, while the other sibling is not interested in the family business and wants to pursue a lifestyle that is quite different from the other sibling, splitting the business “fairly” between the two siblings, i.e. giving each sibling an equal portion of the business, is likely to cause tension and unnecessary disagreements and legal battles down the road.

• Transfer assets based on a natural flow. Instead of transferring assets equally, focus on what makes sense for the individual you are transferring the asset to. For example, if only one sibling is interested in the family business, he or she should be considered to own the family business in the future. If the other sibling is not interested in the business, other mechanisms can be set into place for transferring different assets to that child.