When Lisa Jones of Fairfield County, Connecticut lost her 74-year-old father two years ago, he left everything he had – $1.6 million in a family trust, plus his house – to his third wife, Cyndy, a 50-something woman who would not allow the family a single thing from their father’s house as a memento.
“My grandmother had just died 10 months earlier, at the age of 103, leaving about $500,000 to my dad,” says Jones. “I was OK with him leaving his money to her, but I felt that my grandmother’s money should have been passed to my brother and me – not to my dad’s third wife. My grandfather had wanted that money to go to his heirs.”
The money could have paid for college for her two kids and her brothers’ kids, she believes. Frustrated and deeply upset from the feud, she says frankly, “I can understand how people snap and even want to have someone knocked off. I’ve had to walk away, because when I think about it I go crazy.”
Families have been fighting for – well, forever – but increasingly they’re feuding over inheritances. “The problem is getting worse as the population ages and as boomers are inheriting their parents’ estates and leaving their own estates to their millennial children,” says attorney Ike Devji, of Lodmell & Lodmell.
With divorce and blended families common today, litigation is on the rise as Americans work through the courts to get at least a piece of their inheritance. Given the stock market’s record performance lately, people have accumulated wealth that they eventually need to distribute – and younger generations don’t want to miss out.
“The vast amount of wealth generated in the last several decades has contributed to the desire on the part of those who inherit to make sure they participate to the extent they feel they are entitled,” says Anne O’Brien, a trust and estate attorney with Caplin & Drysdale in Washington D.C. In most cases, the disputes are about control or lack of control and the perceived lack of equality.
Here’s how to keep inheritance feuds from destroying your family:
Talk before you write. Before solidifying your estate plans, talk to your children and other heirs about their wishes. Find out if there’s anything you might deem insignificant that has a lot of meaning to a family member. If there are personal possessions, for example, that a family member wants, either gift it to them beforehand, write a memorandum or have a family meeting to inform your heirs of your intentions.
“I’ve seen nasty arguments in probate court that stemmed from a collection of figurines or a favorite piece of jewelry that could have been avoided by a discussion beforehand,” says Emily Boothroyd, a financial planning specialist at Westport Resources in Westport, CT.
Update your documents. With second or third marriages, it’s easy to forget to review the beneficiaries in your documents – which is a recipe for disaster. Check beneficiaries on pension payout plans, IRAs, Roth IRAS, 401(k)s, and life insurance policies. Check the title of your home to be sure that it’s set up properly so when one spouse dies, the surviving spouse can stay in the home.
“I once worked with clients who at the time were in their 60s,” says Melody Judge, founder of Life Income Management in Southfield, MI. “They were in a second marriage and each of their first spouses had died. When I asked about beneficiaries, the husband not only had not changed his life insurance beneficiary to reflect his new wife, the primary home was still in the deceased wife’s name.”
Plan early. Create an estate plan while you are healthy and of sound mind. If you wait for an illness to put together your will, trusts, power of attorney and other documents, you might make poor decisions because you’re not thinking clearly, and in the worst case, the legality of your documents could be challenged.
This is no time to go it alone. Get the help of an estate planning attorney or financial planner. You can create unintended problems if you’re not careful. For example, be wary of joint ownership.
“It’s not uncommon for a parent to add a child to a bank account to help with the finances,” says Ramsey Bahrawy, an attorney in North Andover, MA. “This creates a presumption of a gift, meaning that the account belongs to the joint owner upon death. Was that actually the intent? Convenience accounts are the source of many disputes.”
Be fair. Often the issue is not equal division of assets, but fairness – two separate concepts. “One child who has taken care of his parent might deserve to receive a bigger share of inheritance and that might be fair,” explains Peter Cordua, managing member of the accounting firm Cordua Pastore & Associates in Pennsauken Township, NJ.
When Seena Sharp’s mother developed cancer, she asked her three daughters to choose an item she owned with both monetary and sentimental value. “We each made a list of what each daughter would get and signed it,” says Sharp, who lives in Los Angeles. “There was one item that had much more value than the others, so the daughter who received it had it appraised, and gave each of the other two 33 percent of the appraisal. It wasn’t exactly fair, but it wasn’t worth the hassle otherwise.”
When her mother died several months later, a tough time was made easier because there was nothing to fight over. Instead, the daughters cherished their memories.
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