Strategies For Lawsuit-Proofing Your Estate

Forbes Associate Editor, Ashlea Ebeling, wrote a great article last week about estate planning strategies that can discourage a protracted legal battle after your death. The following are some of her suggestions, along with some of my commentary:

1. Treat siblings equally.

Unequal distributions, such as cutting out a child in favor of grandchildren, or leaving an unequal share of your estate to one child, breeds resentment and can potentially lead to litigation by disgruntled children.

But keep in mind that in some situations, an equal distribution is not necessarily equitable. For example, perhaps one of your children is a successful doctor, while another one has special needs and will never be self-reliant. In situations like these, an unequal distribution might not only be appropriate but understandable.

2. Decide who gets which treasure.

Last year, I wrote about how estate planning helps prevent family feuds. Parents often don’t specifically bequeath certain items of personal property. Rather, they expect that their children will cooperate with one another and distribute personal items equitably among themselves. Unfortunately, conflicts can arise when siblings cannot agree.

You can avoid conflicts by talking to your children and determining if there is anything in particular that they would like when you’re gone. Then you can include a memorandum in your estate planning documents detailing how your personal effects should be distributed.

3. Keep track of loans and advances.

If you’ve given a gift, or made a loan to one of your children, specifying whether the gift will count as an advancement or the loan will be forgiven at the time of your death can ward off conflict.

4. Transfer a business with a contract.

Rather than bequeathing a family business to just one of your children in your will, Ebeling suggests that you enter into a contract to sell the business to that child while you are alive. That way, the bequest will be more difficult to challenge.

5. Check ownership of what you leave.

It is important to check your beneficiary designations on assets such as insurance policies, IRAs and 401Ks. Distribution of those assets are not governed by your will, but rather by contract. So, if you create a trust for your children’s benefit in your will intending that it be funded by an insurance policy, but name your children as the outright beneficiaries of the policy, the beneficiary designation will control.

6. Get your own lawyer.

Couples often retain one attorney to prepare all their estate planning documents. But if you are part of a blended family and there is some contention between children from previous marriages, one spouse’s children may claim that the attorney did not adequately represent their parent’s interests.

7. Consider a corporate executor.

Choosing a family member or an adult child as an executor of your estate is not typically problematic. But if there is animosity and distrust among family members, choosing a corporate executor is a good idea.

8. Establish you’re of sound mind.

One of the requirements of a valid will is that the testator be of sound mind.  Alleging that the testator lacked the mental capacity to sign a will is a common means of challenging it. If you anticipate that a family member might challenge your will on the basis of mental capacity, Abeling suggests that you get evaluated by a treating physician as well as geriatric psychiatrist immediately before signing your will.

9. Include a “no contest” clause.

If you anticipate that a family member will contest your will, you can add a no contest clause, or “in terrorem” clause threatening to disinherit that beneficiary if he or she contests the terms of the will.

10. Spell out any disinheritance.

Make sure any intent to disinherit a child is clearly indicated in your will.

You read the Ashlae Abeling’s full article by clicking here.

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