Family Disputes over Inheritance Property
Family disputes over inheritance property are common occurrence. While there is no ironclad solution, disputes can be minimized by engaging in estate planning strategies. Depending on the severity of family dysfunction, individuals may need to establish a trust to prevent having the Will contested or retain a probate lawyer to oversee probate estate settlement duties.
As a probate liquidator, I witness family disputes over inheritance property far too often. Relatives will argue over who receives heirloom jewelry to real estate holdings. Sometimes, heirs will go to great lengths to suspend assets in probate and unleash a mountain of legal expenses in effort to bankrupt the estate.
Inheritance wars are nothing new, but when they arise they can destroy families. Fortunately, individuals can take measures to prevent or minimize inheritance feuds. Those who know problems may arise during probate should consult with a certified estate planner or probate attorney to determine which methods offer the most protection.
Establishing a trust can minimize potential of having the Will contested; however, this arrangement is generally reserved for those with estates valued over $100,000. One option for smaller estates might be a revocable living trust.
This type of trust is used to provide directives regarding how estate property is managed during the Settlor's lifetime and how inheritance gifts are distributed upon death. Setting up a revocable living trust requires retaining a lawyer to ensure assets are properly protected.
Individuals who establish trusts must also execute a last will and testament. This legal document is used to provide directives regarding inheritance property, estate settlement, and to appoint a legal guardian for minor children.
Probate is the typical manner for settling decedent estates that are not protected by a trust. The process can be lengthy and leaves the estate more vulnerable to estate litigation. Individuals can include a no-contest provision within the Will which states that heirs who contest the Will forfeit their inheritance.
While including a no-contest provision can reduce potential for estate litigation, it can add fuel to the fire. Careful consideration should be given to this decision because it can place a wedge between family members that might never be dislodged.
Perhaps the best strategy for preventing family disputes is to arrange a face-to-face meeting. While most people do not enjoy conflict, it can be advantageous to sit down and openly discuss intentions of how property will be gifted upon death. In some instances, it can be beneficial to retain services of a mediator.
Another option for reducing family disputes over inheritance property is to gift items while still alive. The IRS allows individuals to provide tax-free financial gifts of up to $13,000 per individual, per year.
Recipients of monetary gifts are not assessed income tax, but individuals gifting the money may be assessed gift tax if they exceed the annual exemption.
In 2011, the gift tax exemption has been expanded; allowing individuals to provide monetary gifts of up to $5 million during their lifetime. These gifts are in increments of $13,000 per individual. Prior to giving away money or personal property it is strongly recommended to consult with a tax attorney.
People often procrastinate about estate planning, but those who do not take time to execute a Will or protect valuable assets using a trust are doing their family disservice. Those who die without a Will have no final say-so over who will receive inheritance gifts. Instead, the estate is settled according to state probate laws.
While you won't have any control of family disputes over inheritance property once you die, estate planning can provide peace of mind knowing you've taken preventative measures.