There is a saying that the love of money is the root of all evil. But few things can break up a family more than money issues upon the settlement of a parent’s or life partner’s estate. Family harmony is usually an important issue when parents write out their final distribution wishes in their will. Simple or complex estates can run the risk of disharmony caused by a lifetime of family interactions, rivalries and learned behaviors.
Some reasons for the conflict is greed or a perception of wrongdoing, but most times it is a reflection of how the person wants, or expects, to be valued by the parent/partner. It can be difficult to resolve an issue when everyone sees themselves as taking the moral high ground.
Here are several common issues, and how to deal with them ahead of time to reduce the possibility for family discord regarding your will.
1. Picking an Executor
So let’s start with the executor, the person who will settle your estate. The executor’s job is to pay the estate expenses, debts and charges, round up the assets and pay the beneficiaries in accordance with the provisions of the will. An executor is named by the estate owner in a will. If the estate owner doesn’t choose an executor, the court will appoint an administrator.
There are advantages to choosing the executor of your estate rather than allowing the court to appoint someone. The idea is that you would choose your executor based on what you want to happen when you are no longer around, so selecting someone who knows you, understands what you are trying to accomplish, and is willing to carry out your wishes is key.
If you decide to go this route, consider talking to your potential executor to make sure they will do the job as you wish and as outlined in your will. You may also want to name a backup executor, since stuff happens — like they predecease you, are not up to the task when the time comes or choose not to do the job as outlined by you. I believe in good communication and suggest you discuss, at least in general terms, if they are going to get paid (fee, commission or bonded, etc.), how to handle some difficult issues with family or relatives, and other key information to help the executor carry out their role.
If you don’t designate an executor, a court appoints an administrator to settle an estate. If there is no will, a probate court decides how to distribute your assets in accordance with state law, which may or may not be what your intentions were. There can be a temporary administrator appointed to handle immediate needs until the administrator is appointed. Court appointments are paid, and in New York state, for example, there is a commission schedule that is usually followed.
The executor’s/administrator’s job is to pay the estate expenses, debts and charges, round up the assets and pay the beneficiaries in accordance with the provisions of the will.
In terms of safeguards for the executor to follow — there are ways you can care for a person who is not able to take care of themselves, or deal with someone who spends more than they have, are going through a divorce or difficult financial or business times, and you do not want your assets to become part of the action. A good attorney will discuss and include all these items and many more safeguards in your final will.
2. The “Unchallengeable” Will: Does It Exist?
A will can always be challenged, but it’s up to the challenger to prove why their objection is valid, such as the will was made under duress or the estate owner was not competent at the time.
3. Should You Talk About Your Will With Your Kids?
I am a proponent of telling children of your wishes and expectations. They will/may understand (doesn’t mean they will like or agree with your wishes and expectations) and your actions may settle a few disputes beforehand. Most children look for some assurance or equality in what parents think of them. So if you decide some are more “equal” than others — or even if you want to contribute to a charity, for example — think the issue through carefully and put your decision in writing. After all, this is your legacy, so be thoughtful of the result. If someone gets more money for education or a business, then consider balancing that with other items of equal value. Are you rewarding the person who made bad decisions at the expense of someone who excelled? If you are charitably inclined, letting your beneficiaries know of this desire beforehand can prevent contrary interpretations when you are not around to settle issues.
4. Can You Give While You’re Still Alive?
There are many gifting strategies, including taxable and non-taxable amounts (annual exclusion). You can split your assets before you pass away, however, there may be gift tax consequences upon the transfer of any property — including money that may be above the gift tax threshold, capital gain taxes on the distribution or sale of property, or other consequences. Consult with your CPA or tax adviser for clarification.
Many times people live and depend on assets they have accumulated over their life, so giving away the assets may not be a viable or comfortable option. Gifting is complex, which is why working with a good planner, tax adviser and estate attorney can be key to any estate plan.
No parent wants to think about their life’s work torn apart by fighting children. Though it may be a difficult topic to discuss, parents/partners may want to think carefully what and to whom they give, and to consider having a will and getting their wishes in writing. Consult an attorney. Talk to your children. You may feel you do not owe anyone an explanation for you decisions, but it can be very helpful to give people a clear idea of what you want to happen.
If a court needs to settle a dispute, they try to figure out what the parent intended and act in the best interest of all beneficiaries. Legal costs can add up quickly, but the impact of legal disputes can potentially leave a more permanent emotional wound that may be carried down the generations.
This story is an Op/Ed contribution to Credit.com and does not necessarily represent the views of the company or its partners.
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