Five Steps to Help Avoid Estate Litigation

Having to go to court to settle the estate of a loved one is stressful on many levels. Litigation diminishes the value of your estate and delays its dispersal. Perhaps worst of all, estates embroiled in litigation due to ambiguity and questions about the deceased intent can tear a family apart, leaving lifelong scars.

There is action you can take to help avoid having your estate fought over in court. These five steps can add clarity to your intentions and reduce the possibility of your estate going through expensive and unnecessary litigation.

 

  • It sounds simple; communicate to your heirs what your intentions are and how you want your estate distributed.  This is very important when the disposition is not typical, that is not  to natural heirs. If your estate is to be distributed unevenly or if a child is to be left out it is best to discuss the issue with them or leave a letter of explanation. More often than not it is the expectant heir that is left out or slighted that seeks a remedy in court; a letter of explanation can effectively keep their claim out of court.
  • Make sure your estate documents are properly prepared; drafted by a trusted lawyer. The main reason for estate litigation is improperly drafted wills and trusts. Avoid online trust and will mills, the cookie cutter approach will leave you with documents rife with ambiguity. Properly drafted, customized to your individual circumstances, estate planning documents can assure that your estate is settled quickly and in accordance to your wishes.
  • Periodically review and update your estates documents. An entire estate can be dragged into court because beneficiaries were not added or removed due to life circumstances. Just imagine the legal conundrum of disposing of a payable on death account whose beneficiary dies before the author. The review should also include updating the beneficiaries on life insurance, pensions and IRAs.
  • Dividing up personal property is often a battle ground for surviving family members. It is not uncommon for disputes over personal items with more sentimental than monetary value to hold up the administration of an estate. By leaving specific instructions in your will or trust; or by using an easily updated personal property memorandum you can eliminate any questions in regard to your personal property and who should receive it at your passing.
  • It is possible to preempt disputes over your estate by including a “no contest” clause. This clause attempts to discourage litigation of wills and trusts by providing that an heir challenging the provisions of your estate documents will be excluded from any inheritance. This clause carries varying weight depending on where you live; and it does not preclude an action brought against your estate made with probable cause and in good faith.

Your estate is the legacy you leave to your loved ones, having implications both financial and emotional that will last long after you are gone. The guidance of a qualified estate planning attorney can help you make that legacy a long and fruitful one for your family.

Protecting your assets from creditors: Trusts and other strategies

Dallas News recently published an article that’s well-worth reading. The article discusses why everyone should undertake estate planning, regardless of their wealth. Estate planning doesn’t only involve writing a will that specifies the distribution of your assets. It also has other important purposes.

Protecting assets

Among the many reasons for estate planning is the need to safeguard assets and protect them from creditors. The assets you’ve worked so hard to save up and pass on to your beneficiaries are vulnerable to future legal claims. If you fall into debt or are sued, they could be taken from you.

It’s important to consider these issues before you’re in financial trouble and need to deal with the demands of creditors. Once you already have a potential creditor with a claim to your assets, any asset protection plan you initiate might be undone by a judge if it’s clear that you’re trying to keep assets away from specific creditors who already may have a claim on them.

Strategies for asset protection

You also need to give careful thought to how you’ll protect your assets. Trusts are one strategy for safeguarding assets. Not all trusts, however, will protect them. For example, a revocable living trust doesn’t shield your assets from people who may have a legal claim on them. Once you form such a trust, you still maintain control over its contents, and as such they’re still considered yours; the trust can be revoked and the assets seized.

One type of trust that may shield your assets is an irrevocable trust. However, with an irrevocable trust, you’re relinquishing control of the assets in the trust. To some people, under some circumstances, this loss of control wouldn’t matter. To other people, it would be a huge price to pay to gain some strong asset protection.

Another possibility is to form a Family Limited Partnership (FLP). This arrangement would pool your family’s assets into a business partnership for which various family members have shares. This arrangement could give you strong asset protection and might also offer some tax advantages. However, it also requires a great deal of forethought to plan properly so as to not jeopardize your best interests.

There are other ways to reduce your personal liability in the event of a lawsuit or to protect assets from creditors. For example, under Texas law, certain assets are already considered exempt from bankruptcy, including a variety of retirement and tax-exempt pension accounts.

When you contact an estate planning attorney, keep these issues in mind. Consider which of your assets might be most vulnerable. And be sure to discuss asset protection as part of your overall estate planning.