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Oct 2014
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October 22, 2014

Inheritance Disputes: How to Nip Them in the Bud Now


Family disputes over inheritances are more common than you might think, including in families that have historically gotten along. One of the biggest contributors to family disputes after a loved one’s death is the suspected or actual mismanagement of the estate or trust. Here are some tips on what you can do now to nip these disputes in the bud and leave behind a legacy of love—not war. 

Fiduciary Defined

There are different types of fiduciaries, but for the scope of this article, a fiduciary is the person who will manage your financial affairs when you die. The fiduciary in charge of your estate is called the personal representative. The fiduciary in charge of your trust assets, if you have a trust, is the trustee. A personal representative is appointed by the Probate Court. The trustee is named in the trust document.

You have the power to name whomever you want as the fiduciary in your will or trust.  The default thinking of many is that they want their spouse or a child to be their fiduciary. The alternative to naming a family member is naming a professional fiduciary, which can come in a variety of forms: bank trust officers, trust companies, attorneys and small-shop fiduciary service businesses.

Drawbacks of Naming a Family Fiduciary

As a dispute resolution specialist on inheritance issues, I see similar problems crop up for families over and over again. Often the errors that are made by a family member fiduciary are accidental, but cause loss to the estate or trust. Sometimes the family member fiduciary is held personally financially responsible for the error (meaning out of their own pocket). This can be true even if the will or trust agreement makes it clear that you do not want your family member fiduciary to be held personally responsible for errors.

Common errors family member fiduciaries make include:
  • Not keeping beneficiaries reasonably informed about administration;
  • Not following the instructions in the will or trust document (and rather just doing what he or she believes the deceased person wanted or would have wanted);
  • Misunderstanding the instructions in the will or trust document;
  • Not reading the will or trust agreement, or only reading parts of it;
  • Not consulting with an attorney to assist in administration, or waiting too long to do so;
  • Transferring or selling assets to himself or herself;
  • Favoring a beneficiary or group of beneficiaries over others;
  • Not keeping adequate records of his or her administration; and
  • Mixing estate or trust assets with the family fiduciary’s personal assets.
Additionally, naming a family member as a fiduciary could cause unintended psychological issues. Some people view who in the family that is named as the fiduciary as an expression of who is more loved, trusted or responsible. Naming all children as fiduciaries can work in limited circumstances to avoid this problem, but doing so can also cause inefficiencies in administration and can lead to disagreements about decision making.  Naming a surviving spouse as your fiduciary in a blended family also leads to a significant amount of inheritance disputes because of the inherent strain between the surviving spouse’s current needs and the surviving children’s remainder interest.

It is also difficult for a grieving family member to be thrown into administration. Administration is time consuming and confusing for people who are not professionally trained. 

The “Now” Solution

The most common sources of inheritance disagreements can largely be eradicated now by either naming a professional fiduciary to manage your estate or trust or instructing your family member fiduciary to work with a knowledgeable attorney right after your death to guide them through administration. While there is a fee to the estate or trust for working with professionals, the cost of improperly administering and ending up in court is much higher monetarily and emotionally.

Professionals know what they are doing, are outside of the family and the complicated dynamics that can come with that, and are neutral. With that come fewer errors, more family harmony and quicker administration. The bottom line: reflect on who you have named as your fiduciary, the value of professional fiduciary services, and consider discussing these issues further with your estate-planning attorney.

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