Keep the peace: Three ways to avoid an inheritance battle

Families typically strive for harmony in their estate planning. But after you die, family harmony is often strained by the process of settling your estate.

That process can be complicated and confusing, even for families who’ve been through it before. Challenging decisions are almost always required at some point. Old family tensions find a way to surface. Open-ended or vague language in your estate planning documents can compound the difficulties.

What’s the best way to avoid unnecessary conflict? Focus on the following three steps to keep the peace among your family when it’s time to settle your estate.

1. Be Organized

The first step seems intuitive, yet often is neglected. Document all your assets and their values, even if only estimates. Locating and validating documents related to your property after your death adds time and expense to the estate settlement process. Having your balance sheet and property records organized and easily accessible means the settlement process can start efficiently. In addition, it avoids confusion and can pre-empt mistrust, as the information comes directly from you.

Keep your important documents alongside your will, revocable trust and powers of attorney. This includes titles to property, account statements and other ownership records. Ensure your documents are up to date, including beneficiary designations for all retirement accounts and life insurance. Once you’ve done that, make sure you share this information with your named executor or trustee.

If you have any valuable tangible assets, such as art, jewelry, automobiles and other collectibles, it can be helpful to have them inventoried and valued periodically.

2. Be Specific with Bequests

Much of the tension during estate settlement arises around bequests of specific items of property. If you plan to leave tangible assets or family heirlooms to specific family members or friends, consider sharing your intentions with the people impacted. This can include both the people who will receive the property, and those who will not but otherwise might expect they will. These conversations are not easy. But they are necessary if you want to work out tensions now rather than let them flair after you’re gone.

If you have specific intentions with respect to your tangible property, avoid open-ended instructions, such as “distribute my tangible personal property in equal shares to my children as they agree.” While this may sound fair and simple, your trustee or executor will need to decide how to distribute that property among your children. It’s best to describe assets precisely and be exact as to who is to be given what to circumvent potential disagreements.

In that vein, it is generally not a good idea to have heirs “share” an asset, particularly real estate. In most cases, shared responsibility can foster ongoing tension about bill paying, renovation, usage patterns or other issues.

If you’re uncertain, or your conversations with your heirs reveal no interest in a particular item, consider selling items while you are alive (after consultation with your tax advisor). Or, indicate in your will a direction to sell property not assigned to specific beneficiaries. This can avoid conflicts with beneficiaries who prefer assets not to be sold but aren’t in a place to take on ownership themselves.

For personal items with less monetary value (think photos, sentimental heirlooms, minor collectibles), consider giving those to your beneficiaries during your lifetime or make specific instructions for distribution. Sentimental value often can override monetary value in the minds of beneficiaries, so never underestimate the significance of your heirlooms, even if they have little or no commercial value.

3. Emphasize Communication

Like most things in life, estate settlement is facilitated by effective communication. Talk about your plans with your spouse, your family and your nominated executor or trustee. Be clear about what your heirs can expect to happen with real estate and other valuable tangible assets or family heirlooms.

It can be helpful to introduce your beneficiaries to your nominated executor or trustee while you are living. Communicating with all of them regarding the details about your assets, how they are owned, and how you plan to dispose of them at your death can make sure everyone is on the same page. Explain your reasoning behind the specific bequests of valuable or sentimental assets and how you envision decisions will be made. This is especially important when you consider that your beneficiaries will work with your executor or trustee throughout the settlement process, which can last up to a 3- to 4-year period.

You also might consider writing down your plans in a letter of intent to informally outline your wishes tied to the terms of your will or trust. This can be an informal letter to your children or other heirs, which is a personal way to relate your preferences, express your values and provide emotional clarity. While such a letter will not be a binding legal document, it can help your beneficiaries understand why you left your assets the way you did.

Build Understanding

At Fiduciary Trust, we often help families do a trial run through each step of their estate settlement, checking for potential conflict spots. This allows you to see how the process plays out in advance and identify any issues. It can inspire honest conversation among your heirs about their feelings and preferences.

Will your children really share responsibility for that vacation home? Who has stronger emotional ties to family photos? These and similar unanticipated questions can be answered up front.

By identifying feelings and potential discord, you can head it off and uncover solutions. The end goal is to foster understanding among all your heirs. Combining empathy with effective communication is the best course to keep the peace.