If you’re concerned about family conflict after you pass away, you must have an estate plan to minimize that potential for conflict by making your wishes clear and legally documented.
Unfortunately for families, most people (whether they are concerned about conflict or not) never get around to estate planning. In fact, research shows that about 60% of U.S. adults don’t have even a simple will.
For those that do have a will, they often fail to recognize that not all of their possessions pass through their will. For example, 401(k)s, life insurance proceeds, pensions, and annuities pass by beneficiary designation.
The (Washington, PA) Observer-Reporter’s recent article, “Improper estate planning can lead to familial conflict” explains that some of your possessions will pass through probate. If you own property in several states, the process could become more difficult for your loved ones. A way to simplify the process for them, is by having an updated will or, better yet, a living trust. In either case, it is critical to ensure that our assets are properly integrated with your will and/or trust so that all of those assets pass as you intend after you are gone.
For instance, even if your will or trust states that all of your possessions are to be split equally between your two children, this may not be what actually occurs. If your life insurance lists only Bob as the beneficiary, he’ll walk off with 100% of the death benefit. Your younger son Doug will receive only half of the assets that don’t have a beneficiary designation. Assets that pass by designation are not controlled by the will. That is why Bob gets all the money from the insurance. As you can see, it’s vital that you review your accounts’ beneficiary designations regularly, to make certain they’re up to date. Check on them every few years or when there’s a family divorce, birth, or death. Once you’re gone, they can’t be changed.
In addition, your estate plan should include two powers of attorney (POAs). The first POA is to make health decisions, often contained within a document referred to as an Advance Healthcare Directive. The second POA is to make financial and property decisions (whether to sell property, for example), if you don’t have the mental or physical capacity to do so yourself. Your POA agent has your authority to make decisions for your own benefit. Without a POA, a court supervised conservatorship over an incapacitated person’s affairs is often required. That is not a situation you want your loved ones to be burdened with, and it is so easily avoided by a properly drafted POA.
POAs end when a person dies. At that point, the assets are distributed according to the terms of the wil or trust (if there was one) or according to state intestacy law if not.
It’s common today for families to have blended elements. Many people were married before and may have had children. Here’s an example of a famous father who made his third wife executor of his estate, giving her control of his business. In this case, his equally famous son was the principal player in the father’s business. The son didn’t understand the implications of his father’s estate plan. When the father died, there was a long and expensive legal battle between the son and the third wife.
Can you guess who it was? These stories are endless; however, in the above case it was professional stock car racing driver Dale Earnhardt Jr.
Work with an experienced attorney and don’t let this happen to your family.
Reference: The (Washington, PA) Observer-Reporter (December 7, 2018) “Improper estate planning can lead to familial conflict”