Estate Plan Disputes Are Painful. They Don’t Have to Be Disastrous
Multiple beneficiaries, layered asset structures and significant financial stakes make high-value estate plans susceptible to court challenges.
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Love is a battlefield, and sometimes estate planning can be one too.
There’s a lot that can go wrong with estate plans when a person with significant wealth dies. A pack of interested (i.e., slighted) parties can emerge to pursue claims from incapacity to incompetence, undue influence and breach of fiduciary duty. Even with careful legal planning coordinated by specialist attorneys, court battles are sometimes inevitable. It’s a reality that financial advisors serving affluent clients need to prepare for as trillions of dollars are set to pass between generations in the coming decades. High-value estate plan disputes are always painful, but with the right planning and expertise, they needn’t be disastrous.
“These kinds of disputes are as old as mankind,” said Scott Rahn, founding partner at RMO Lawyers. “These are literally biblical issues. Siblings fighting each other, parents fighting kids, step-parents battling stepkids. It can last for years and tear families apart.”
Mo’ Money, Mo’ Problems
No two estate-planning disputes are exactly the same, Rahn said, as each wealthy family has a different mix of assets, liabilities, charitable giving goals and, in many cases, disgruntled relations who expected more. There’s likewise no single playbook for foolproofing the estate, as even the most carefully constructed trusts can be subject to litigation. But there is one common thread running through the worst cases that hit Rahn’s desk, and fortunately, it’s something advisors can help address.
“It’s a lack of candor about wealth, leading to a fractured understanding about the purpose and intent of the family’s fortune,” Rahn said. “Clients spend so much time and effort building wealth but so little time understanding and communicating about it.” Trusted advisors are in the perfect spot to kickstart these conversations, especially as they pertain to bridging generational divides. They don’t need to create perfect family harmony to make a difference, either. “It’s more about making sure stakeholders understand the plan and avoiding surprises.”
Estate disputes aren’t new, but the amount of money at stake is:
- Nearly $124 trillion is set to change hands through 2048, according to Cerulli Associates.
- Some $106 trillion will flow to family and heirs, with the rest going to charity.
The Gift Horse. Another tip is that affluent clients shouldn’t conflate giving with communicating. “Expectations get created when money or expensive things are given without the context of a broader plan,” Rahn said. “You grow up getting new cars, enjoying wonderful vacations and big houses and nice clothes. It’s natural that you come to expect a lot from the estate.”
In cases where a lawsuit is filed, advisors won’t have the legal expertise to help in court, but they can address the emotional side of conflict. “Clients facing these lawsuits need to decide the right balance between fighting it out and prioritizing their own emotional wellbeing,” he added.
