Is your estate plan challenge-proof?
Minimize postmortem disputes over your estate plan
The goal of estate planning is to gain the peace of mind that comes with knowing your family will be provided for and your wishes will be carried out after you're gone. Few things can disturb that peace of mind as quickly as the fear that someone will contest your plan.
No protection is absolute, but with thorough planning you can minimize the chances that an assault will pierce your armor. Let's take a closer look at several tips for "bulletproofing" your estate plan.
The first step is to evaluate your risk. There's no reason to invest in protection you don't really need. If your estate plan distributes your wealth to the "natural objects of your bounty" – such as your spouse and children – in roughly equal shares, you probably have little reason for concern. But if you plan to disinherit a family member or leave most of your assets to charity, you might want to shore up your defenses.
There also may be a heightened risk of litigation over your estate plan if you own a family business or have children from a previous marriage.
Protection for your estate plan generally falls into two categories: 1) strategies that discourage others from contesting your plan, and 2) those that make it more difficult for a challenge to succeed.
There are several strategies you can use to avoid disputes over the terms of your estate plan:
Treat everyone fairly. It may seem obvious, but if your plan makes everyone happy, there's no reason for anyone to contest it. Remember, though, that equal doesn't necessarily mean fair. Suppose you have a young child from your current marriage and a financially independent adult child from a previous marriage. If you divide your wealth between them equally, the younger child – who likely needs more financial help may perceive your plan as unfair.
Talk it over
If your estate plan is atypical, you can avoid misunderstandings and potential disputes by sitting down with your family and explaining your motives. Perhaps you're leaving the bulk of your estate to a family-run private foundation to get your children involved in philanthropy. If so, the time for them to learn this is now, not at the time of your death.
If you own a family business, you might plan to leave equity interests to family members who work in the business and use other assets to provide for those who don't. Or you might use voting and nonvoting shares to divide the business equally while preserving management control for family members who work in it. Whichever approach you use, it's important to discuss your reasoning with those affected and solicit their input.
Create a revocable living trust
Using a will as your primary testamentary instrument guarantees that your estate will go through probate. That means your plan will become a matter of public record and your named beneficiaries as well as anyone legally entitled to a share of your wealth – will be notified and given an opportunity to object in probate court.
In most states, you can avoid probate by using a revocable trust. Without probate, there's no notice requirement or oppommity to be heard in court, so someone would have (0 file a lawsuit to challenge your estate plan. For a revocable trust to be effective, you must transfer title (0 all of your assets to the trust, including any assets you acquire after you establish the trust.
Use a no~contest clause. Consider making bequests that include a "no-contest" clause. Essentially, this clause says that, if a beneficiary challenges your will or trust, he or she forfeits the bequest. For a no-contest clause to work, the bequest must be large enough to deter the person from risking an unsuccessful challenge.
If your estate plan is unconventional or you plan to disinherit one or more family members, it may be difficult to avoid a challenge. And even if your plan is the epitome of fairness, it's not always easy to predict who might feel slighted.
Most wills that are contested involve claims of undue influence or lack of testamentary capacity (though fraud and invalid execution also may be grounds for a challenge). Strategies for thwarting these attacks include:
Have your head examined. Seriously, one of the best ways to establish your testamentary capacity is to undergo a "mini mental state examination" or have a medical practitioner attest to your competence. The examination should be conducted near the time you execute the will – on the same day, if possible.
Choose the right witnesses
Witnesses should be people you expect to still be alive and easily located years or even decades later - and they shouldn't be beneficiaries of the will. Ideally, they will be familiar enough with you and your family that they can attest to your testamentary capacity and freedom from undue influence.
Put it on tape. Videotaping the execution of your will can be an effective way to demonstrate your competence. It also gives you an opportunity to discuss the reasoning or motives behind your estate plan and refute any potential claims of undue influence. Obviously, no one who stands to benefit from your will should be present.
Be sure to plan your statements carefully so that nothing you say can be misinterpreted. Also, for this strategy to work, you should be comfortable with the recording process. The last thing you want is viewers mistaking discomfort for duress or confusion.
If you're concerned that postmortem challenges might derail your estate plan, strategies like the ones described can provide the ammunition you need to fend off would-be attackers. Ask your estate planning professional which combination of techniques is right for your situation.
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