Avoiding Estate Litigation with Wealth Management
Avoiding Estate Litigation with Wealth Management

In estate litigation, the properties and debts of a person who has died are contested in court. At least two parties are fighting it out for ownership of the properties or denying accountability for debts and obligations left behind. Sadly, estate litigation happens more often than not because probates or wills are contested.

The court usually orders mediation first, which is a process of trying to come to an agreement between the parties involved. A mediator must be certified by the court and cannot be picked randomly or forced by one party onto the other party. If the mediator is unable to get the parties to agree, a court hearing is scheduled, and any decision made by the judge is binding.

Avoiding Estate Litigation: Wealth Planning

There are a number of ways to avoid estate litigation. The simplest would be through mutual agreement using estate planning. This can be done among the members of the estate who must have the agreement notarized or by using an attorney who can draw up the legal documents.

Other ways of avoiding litigation are:

  • Make a will and ensure that it is legally enforceable and will be followed accordingly by appointing an executor you trust to represent your wishes.
  • Make sure the executor you select is objective and independent and has no personal interests.
  • Change your will if there are any major changes in your life, like a divorce, death, or new birth. Your will must be updated.
  • Unfortunately, many estate litigation cases today are about “knickknacks” that are not included in the will but treasured by members of the family. A family can be easily divided by a bunch of photographs, clothing, or memorabilia because the owner failed to be specific and include them in the will. A chat among family members is encouraged to make sure the family is on good terms.

Sensitive Issues

Estate litigation can also be caused by sensitive issues, such as same-sex marriage, gift tax exclusions, and changes in tax laws. It is best to consult with an attorney about handling these issues while keeping abreast with the latest developments.

In addition, undercurrents should also be considered as risky situations. For instance, if one child is favored over the others, the immediate reaction of the other children would be unfair distribution. Long hidden childhood grudges are not easily argued with, especially after a traumatic loss in the family.

More Issues to Think About

Mismanagement of inheritance is another issue that can lead to estate litigation. According to a 2013 survey by the Wealth Council, protecting children from mismanagement of inheritance is the third top reason wealth management has become so popular. The first two reasons are avoiding probate and minimizing discord. In the past year, cases involving mismanagement of inheritance by either the heirs or the executor have more than tripled. A major cause for this is the tendency to DIY (do-it-yourself) estate planning. Using personal connections or reading about the process of wealth management online could be false economy, especially if the parties are not on the same page. In fact, the idea of getting or losing money changes attitudes and behaviors. Making sure you have a plan that will be followed and that includes wealth management for the heirs is critical if the heirs are young, impulsive, or not in good terms with each other.

Also, many banks and brokerage firms have adopted a clause on mandatory arbitration for the sole reason of avoiding messy litigation. Thus, aside from dealing with internal squabbles, family members may also have to work with any signed agreements on the liquidation or distribution of assets and liabilities.

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