Minimizing Family Conflicts in Your Estate Plan
The first step to minimizing family conflicts after you die is to acknowledge that conflicts could happen. That’s easy for people whose children don’t get along, but if your children have always been close and supportive of each other, it can be difficult to see the role that you, as their parent, have had in nurturing that harmony, or to imagine it being different when you are gone. But children who always “got along” can and do fall out, often due to the imbalance of power that can arise through the estate settlement process.
Naming an Executor and Trustee
People often name their children as the successor executor and trustee if their spouse dies first or is unable to serve in the role, and they are usually named in a particular order based on factors such as perceived ability, perceived willingness, geographic proximity, or age/birth order. All of those are valid considerations, but it is also important to consider what the role really entails, the power over your estate that comes with it, and the dynamics between your children.
In the abstract, being named as someone’s trustee or executor might seem like an honor, especially to children who were farther down the list of succession or not named at all. But the reality is, being a trustee or executor is a time-consuming and stressful job that can be very expensive to outsource. Putting a corporate fiduciary, such as a trust company, in charge of administering a straightforward estate can complicate and lengthen the process, but if you know your children do not get along or feel they lack the experience, confidence, or reliability to handle such matters, a corporate trustee may be the best option.
Relationships and Roles
If your children get along and you think they can handle your estate administration, the way you construct your estate plan can greatly affect how well they get along decades after you’re gone. Nearly every plan includes provisions for a personal property memorandum to distribute certain items to specific people. Absent such instructions, the standard default is that personal property gets distributed to children in equal shares as they agree, or if they disagree, as the executor or trustee determines. When the trustee or executor also happens to be one of two children disagreeing, or closer to one of two disagreeing siblings, an argument over who gets the watch, the hunting rifle, or the Vitamix can result in lifelong resentment. Really. The best way to avoid conflict is to complete the memorandum. If you have family heirlooms, art, or other “high demand” items and don’t care who gets them, you can specify an in-turn selection process.
An executor comes into play when probate is required, and the role ends when the estate has been distributed, while a trustee’s role can vary considerably depending on the distribution terms of the trust. If your children receive their shares outright, the trustee’s role usually ends once that happens. But if one of your children were to die before you, their share will likely be distributed to their children in trust, and the child you named as trustee will likely face the longer-term role of trustee for those trusts. Nobody wants to think about such scenarios, but the best way to avoid family conflict is to consider and plan for them.
When a child serves as trustee on their siblings’ trusts, the more control they have over distributions and the longer they have it, the more likely rifts are to develop. If beneficiaries will receive their full shares outright over time, distributions are only subject to the trustee’s discretion for a fixed period. Young distribution ages, such as one third at 30, one third at 35, and the balance at 40, may be easy to accept because the payouts still happen in young adulthood. Increase the ages to 50, 55, and 60, and the trustee has control over their siblings’ inheritances for most of their lives. With lifetime trusts, which are often necessary when generation-skipping tax is a consideration, the trustee’s involvement never ends. If lifetime trusts or significantly delayed distributions are optimal for your family, a non-sibling or corporate trustee might be a better solution.
When only one child receives their share in a trust due to spendthrift, addiction concerns, or incapacity, parents often give greater consideration to potential trustee-beneficiary dynamics since a “problem” already exists. No one wants to imagine their children fighting or not acting in each other’s best interest, but proper estate planning is the best way to keep it from happening. In most cases, when children squabble over their inheritance, it is not because their parents saw the potential conflict and ignored it, but because they failed to see the potential for conflict at all.