Over the next 30-40 years, it is estimated that baby boomers will transfer an unprecedented 30 trillion dollars to the next generation, resulting in the greatest wealth transfer of our time. In contrast, studies estimate the previous inter generational wealth transfer (still in process) at just $11 trillion.
Due to the proliferation of second and third marriages, the rise of Alzheimer’s and dementia, and the increasing wealth of our San Francisco East Bay community, the threat of estate litigation has never been larger. There are several things baby boomers can do now to prevent family feuds down the line.
1. DOUBLE CHECK YOUR ESTATE PLAN
Just having an Estate Plan is not good enough. Have you actually read it, word for word? Are your intentions spelled out in clear, direct language that cannot be misinterpreted? Is it legally valid, up to date, and in a safe place?
The reason I ask these questions is because of my daily experience as a trust and estate litigation specialist. For example, I know of several prolific (now retired) estate planning attorneys in Contra Costa County whose estate plans were so poorly done they have fueled dozens of litigations. I have also had quite a few cases where the will or power of attorney is simply invalid because they were done without the guidance of an experienced estate lawyer. And lastly, I have several cases where the estate plan has simply been lost, creating a host of problems for the beneficiaries.
Overall, your safest bet is to check that your Estate Plan is secure, and read through its contents to ensure clarity and relevancy (is it up to date?). If you have any questions, don’t hesitate to take it to a Trust and Estate attorney for reviewal. A solid, clear Estate Plan that accounts for all your unique family dynamics is the best prevention for future lawsuits.
2. ANTICIPATE DISPUTES
Anticipating family disputes is part and parcel of double checking your estate plan (or doing your estate plan). While no parent or individual can predict the future, they can take into account their beneficiaries' personalities and differences. For example, if parents are setting up a trust for two children who tend to have disagreements, a good elder law attorney might suggest naming a third party to act as trustee upon the parents' death. He or she would also help you to anticipate other events that could cause stress and strife among beneficiaries. As an attorney who frequently works with families to resolve trust and estate disputes, I am familiar with the myriad of ways familial disharmony can arise after a loved one dies. There are a number of planning tools that can be employed to dramatically lessen the chances of a conflict.
3. COMMUNICATE COMMUNICATE COMMUNICATE
While I may have placed this as number 3, communication is by far THE MOST important tool you have to prevent fighting over your estate when you pass. Countless estate litigation cases arise out of misunderstandings or lack of communication. And more often than not, miscommunication - or lack of communication altogether - begins years before anyone has actually passed away.
When it comes to money, most of us believe it's best to stay mum, even when it comes to our children. And sometimes for good reason. Many parents believe their children may not work as hard if they know just how much they stand to inherit. While this thought process may have some merit, the alternative can lead to a messy situation after the parent's death. I recommend parents at least begin the conversation about inheritance when their children are mature enough to handle it. A respectful conversation that introduces parents' plans for their bequests allows children to process and accept their decision, as well as provide constructive feedback.
Individuals and parents who are planning to leave large donations to charities, organizations, or other trusted friends and relatives will also likely benefit from communicating with them as well. Overall, it's always best to minimize surprises upon one's death. When a parent or loved one dies, emotions will run high. Anything that person can do to minimize additional stress or shock will allow the best chance for children and beneficiaries to peacefully wrap up their estate.
4. THINK BEFORE YOU GIFT
If you’re over the age of 65, any action you take that provides significant benefit to another (such as changing your will to exclude a family member) can potentially be perceived as Financial Elder Abuse. In most cases, this is difficult to prove without clear evidence of undue influence or a firm diagnosis of dementia. However, it is something to keep in mind if you’re over sixty five and considering wealth transfer to another individual.
While the chance of a lawsuit may exist, taxes are for certain. If you’re feeling inclined to make a gift of your assets or add a child to the title of your home prior to your death - Halt. There are considerable tax savings for the beneficiary of your assets if they wait until after your death to receive them. While allowing family members to use your home, car, or other valuable assets might be a necessary action in your everyday life, it’s usually best to avoid any formal title changes.
5. CONSIDER SKIPPING A GENERATION
With such a vast amount of wealth about to be transferred to the next generation, boomers may wish to spread out their gifts by leaving inheritances that skip a generation. And, depending on family circumstances, leaving money for grandchildren's college tuition may prove more advantageous for family harmony than placing it all in a single family trust. Generation skipping trusts, or GSTs, as they're commonly called, may also have tax advantages for those families with significant assets.
Overall, communication and family specific planning are the two most important factors in preventing family disharmony and unnecessary attorneys' fees. A carefully crafted estate plan that includes a detailed trust, power of attorney, and advance health care directive, puts you, your family, and your assets, in the best position to live healthy and productive lives.