How To Avoid Family Fights Over Inheritance


A recent U.S. Trust Survey Finds Modern American Family Dynamics Complicate Wealth Management. “The top five circumstances that affect overall family financial well-being include: divorce, addictions, untimely death or disability of a primary income earner, medical crises and fights over inheritance or distribution of family assets.”

Let’s focus on disagreements over inheritance or distribution of family assets. If we lived in a perfect world everyone’s behavior and attitudes would be quite predictable. Fortunately or unfortunately, we live in the real world where predictability is at best an imperfect science and even our closest family members may not react according to our expectations.

It is estimated that as much as 70% of family wealth does not make a successful transition from one generation to the next. “The issues of communications, lack of trust and betrayal are again and again the reason for the high failure rate of families around the world,” according to Roy Williams, coauthor with Vic Preisser of Preparing Heirs: Five Steps to a Successful Transition of Family Wealth and Values.

Having helped countless number of people with their estate planning needs over the years, what I have found to be the most difficult obstacle to overcome is to get people to think with their head and not their heart when it comes to distributing their estate. In particular, parents sometimes recognize that although their children may love and respect each other, all bets may be off when it comes to issues of inheritances and dividing money because of their differing capabilities or financial situations.

So, the parent most often will default to the easiest and least stressful solution and that is to treat their children equally by leaving their estate as an outright distribution to each, even though they know it is not the right thing to do.

For example, let’s assume that you advanced one of your children a large sum of money for the purchase of a new home with the thought of their repaying you and that this advancement was unbeknownst to your other child. By leaving their estate equally to their children, was it really equal? There should be an equalization clause in the will that would take into account any large advancement so that the distribution to each child would be equal.

There can be a number of family circumstances that call for more planning. For instance, what happens when a child has poor money management capabilities? Or finds himself or herself in a difficult marriage? Or has special medical needs? In these situations, and many others, a trust created within the Will may offer a potential solution.

Naming one child to serve as a trustee or executor may cause resentment. Being an executor or trustee carries with it a position of power and can be construed as favoring one child over the other.

These are just a few examples of how family dynamics interface with your overall estate plan. You can alleviate these concerns by appointing an independent trustee and executor assuring that decisions will be decided impartially.

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About Ira Brower

I have been in the financial service industry for more than 40 years primarily providing wealth management solutions for retired and soon-to-be retired individuals. I am President and Founder of Garden State Trust Company. Our clients depend on us for elder care solutions, such as; trust and estate planning, investment services, and lifestyle management. We also administer to “special needs” or “supplemental needs” trusts.

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