Varian Law LLC

Family Dynamics Impact Estate Planning

What type of planning should be done if family members do not get along?

The issue of blended families, and dealing with lack of trust among family members, while engaging in estate planning was recently discussed in a Market Watch advice column titled "My mother-in-law is deceitful -- can we stop her from stealing my wife's inheritance?"

In this particular case, a man and his wife believed that his mother-in-law is evil and deceitful. They are convinced she will hide assets and fraudulently transfer accounts to herself as soon as the wife's father passes away.

The father will not say much about it, other than stating that his children will be taken care of. They wonder what they can do to prevent a problem from arising and whether they should hire an attorney.

As the advice columnist points out, there is not much that can be done before the father passes away. Hiring an attorney too early might just make the problem worse - especially if it angers the father.  They might also be viewing the mother-in-law incorrectly and she might have no plans to steal anyone's inheritance.   The only option may be to deal with the issues after the father passes away.  But advanced preparation could never hurt.

If you have concerns about a deceitful or dishonest family member, you should consult with an experienced estate administration attorney.

Reference: Market Watch (Jan. 8, 2018) "My mother-in-law is deceitful -- can we stop her from stealing my wife's inheritance?"

Trustees Need to Be Careful

The administration of a Trust is much more complex and time consuming than most people believe.  While some Trust administration issues are common among all Trusts, there are many different types of Trusts and each type of trust presents unique circumstances, challenges and rules that must be followed.  To say the least, however, just like with estate administrations, the assistance of an experienced estate/trust administration attorney is absolutely essential to the proper administration of a Trust.  

One example of how things can go wrong is the McClatchy case, which involves a claim for breach of Trust.

The breach-of-Trust allegation dates back to a suit filed in 2012 by Carlos McClatchy, son of James McClatchy.  James McClatchy died in 2006.

The James B. McClatchy Trust was set up in 1974.  After James McClatchy’s death, Carlos McClatchy became ​an income beneficiar​y of the Trust.  Carlos McClatchy alleges that the Trustees of the Trust failed to properly administer the Trust and preserve its value.  Carlos McClatchy is now getting his day in court concerning the Trust after years of preliminary work, according to the Sacramento Bee in "San Francisco trial weighs breach-of-trust claims by McClatchy family member."

What this case illustrates is that Trustees need to be careful with how they handle Trust assets.

An experienced Estate/Trust Administration attorney can assist you with your responsibilities as a Trustee.

Reference: Sacramento Bee (Sep. 13, 2017) "San Francisco trial weighs breach-of-trust claims by McClatchy family member."

How to Potentially Reduce Challenges to Wills

A No-Contest Clause makes people think twice before challenging a Will.

A way around the problem of challenges to a Will is to include a no-contest clause, according to Press Enterprise in "The Pros and cons of the no-contest clause."

A no-contest clause helps prevent these challenges.  It simply states that anyone who challenges the Will will forfeit their right to receive anything.

 As a result, the document will be effectively rewritten to disinherit the challenger.

This is an easy way to stop many people from challenging an estate plan.  They might not be happy with what they received, but they do not want to risk getting nothing.

Some criticize these clauses as deterring people from challenging an estate plan when they have good reason to, such as when there has been undue influence used by someone else to get more of the estate than he or she should.  However, most states will not enforce a no-contest clause if the person challenging the Will has cause to do so.

An experienced estate planning attorney can advise you on creating an estate plan that fits your unique circumstances and could include a no-contest clause.

Reference: Press Enterprise (Aug. 5, 2017) "The Pros and cons of the no-contest clause."

Trust Details Need to Be Very Specific

Daughter sues her mother for wasting $13 million of inheritance.

A trust set up for a young girl was originally overseen by Citibank.  However, in 2003 the mother took over the trust creating the groundwork for a future battle, according to the Daily Mail in "Daughter sues her 'self-involved' mother for 'frittering away more than $13m of her inheritance - so she could buy cars and a $6m mansion next to Gwyneth Paltrow in the Hamptons'."

It all begins with a couple meeting through a singles ad and then getting married. They had one daughter and divorced after a few years. The father died when their young daughter, Elizabeth Marcus, was nine.

According to court records filed by the daughter, her father did not want his ex-wife to receive any of his assets. Instead he left half of his estate in trust to Elizabeth Marcus, with a child from a previous marriage receiving the other half.

Elizabeth Marcus is suing her mother now, claiming that her mother has stolen her inheritance to buy expensive items for herself, including a mansion and fancy cars. Most of the original inheritance is now alleged to be gone.

The mother denies the accusations.

A question remaining is how was the mother able to gain control of the trust, if the father did not wish her to have it?  

Reference: Daily Mail (April 23, 2017) "Daughter sues her 'self-involved' mother for 'frittering away more than $13m of her inheritance - so she could buy cars and a $6m mansion next to Gwyneth Paltrow in the Hamptons'."

A Well Developed Estate Plan Can Prevent Family Feuds

Planning for your estate is always a good idea.  It may also help out family members in the process.

Many estate disputes are avoidable, according to Wealth Management in "How to Prevent Feuds Among Heirs."

Families often fight over the distributions of assets in an estate.  While some of those battles cannot be avoided because of family dynamics, the single most important thing that can be done to prevent family fights over an estate is to implement a well developed estate plan.

Sound estate plans can often prevent any reason for families to fight. Proper planning can ensure that everyone gets their fair share of the estate, and the estate plan can set forth reasonable means for resolving any disputes that do come up.

However, just getting an estate plan is not always enough.  The next thing that should be done is to communicate with your family about your estate plan.

People who know what they are going to get and why that was the choice of the departed are much less likely to start fights with other family members over the estate.

An experienced estate planning attorney can guide you in creating your estate plan (or updating it if you already have one). That may well be the best way to prevent those family fights.

Reference: Wealth Management (April 10, 2017) "How to Prevent Feuds Among Heirs."

Despite Common Misconceptions, A Mirror Will Can Be Changed

Despite the occasional confusion about Mirror Wills, they can be changed.

“Mirror Image Wills” often turn out to be a common source of litigation, according to the National Law Review in "Contracts to Make Wills or Trusts."

The “Mirror Image Will” is usually where spouses agree that the first to pass away will leave everything to the surviving spouse, and the second to pass away will agree to leave their entire estate to the agreed upon heirs.

The problem starts when the surviving spouse has a change of plans, and changes his or her Will to divide things differently, or to give the estate to different heirs.

The heirs of the original Mirror Image Wills routinely argue in court that the spouses entered into a contract to make the original Wills. Unfortunately, that is simply not the case in almost all circumstances.

To be valid, a contract requires that a person receive some sort of compensation, called consideration, for whatever promise it is that they are contracted to perform.

In the case of Mirror Image Wills, spouses rarely receive any form of consideration for promising not to change the Will after the death of the first spouse.

It is important to understand this point because the issue frequently comes up in estate litigation and it can cost an estate a lot of money when the issue is raised.

An experienced estate planning attorney can guide you in creating a Will and estate plan that meets your unique circumstances.

Reference: National Law Review (April 10, 2017) "Contracts to Make Wills or Trusts."

Common Reasons Family Fights Develop over Estates

There are five common reasons that fights break out within families over settling an estate.

Family members can easily become embroiled in a battle over an estate. Sometimes it is just because family members don’t like each other. However, there are actually five common reasons for the disputes, according to Wealth Management in "Five Reasons Families Fight over Estates." 

The reasons include:

• When one sibling lives close to their parents and another lives a great distance away, leaving the sibling who lives closest more assets can lead to disputes.
• If a wealthy person gets remarried later in life and leaves a large portion of their estate to the new spouse, fights between that spouse and children from previous relationships are common.
• Any blended family situation can lead to family battles over estates, if proper plans have not been made.
• When wealthy people leave large sums to a trusted caregiver, then it is likely the family will fight with the caregiver over those assets.
• If any person has not adequately prepared and drawn up proper estate planning documents, then family fights over the estate are very likely.

Reference: Wealth Management (Jan. 30, 2017) "Five Reasons Families Fight over Estates."

Federal Court May Be the Answer When Suing a Trust

Because of potential prejudice by State Courts in a suit against a Trust, it may be beneficial to head to Federal Court.

If a plaintiff is from out of State, it is sometimes wiser to sue a Trust in Federal Court, as described in Wills, Trusts & Estates Prof Blog in "Trustee Citizenship Regulates Federal Diversity Jurisdiction."

The plaintiff in the article was a citizen of Taiwan suing a Trust that her ex-spouse set up. While it is not clear why she did not want to sue in State court, she did choose to file suit in Federal court.

One way to get jurisdiction in Federal court is called diversity jurisdiction.  For it to apply, the plaintiff and the defendants have to be residents of different States or Countries. In this case, the court decided that diversity jurisdiction was appropriate based on the citizenship of the Trustee.

Reference: Wills, Trusts & Estates Prof Blog (Dec. 14, 2016) "Trustee Citizenship Regulates Federal Diversity Jurisdiction."

Money May Not Be the Root of Family Estate Disputes

If one watches an estate dispute among wealthy families in the media, they sometimes find out that it isn’t just about the dollars.

Traditionally feuds are over wealth, crown or other inheritances and are considered to be about money. Generally speaking, however, something deeper is going on, according to Psych Central in "Death, Wealth, and the Psychological Anatomy of a Family Dispute."

In the U.S., the participants in a family estate fight no longer enlist armies and fight it out on a field of battle. Instead, people today fight things out in Court. However, the reasons for today’s disputes are very similar to what they were hundreds of years ago.

Psychologists and even pop culture have known for a long time about sibling rivalry. Although there is disagreement about the core reasons for the phenomenon, no one disputes that it exists. Whether it has its roots in birth order, a desire to be loved more by parents or something else, sibling rivalry is a real thing that does not go away when children grow up.

The same psychological reasons that lead siblings to argue over who gets to ride shotgun in the car are the same reasons that lead to arguments over estates.

Knowing sibling rivalry exists and making estate plans with it in mind, can sometimes make for a smoother process.

Reference: Psych Central (Dec. 13, 2016) "Death, Wealth, and the Psychological Anatomy of a Family Dispute."