Creating an estate plan serves several purposes. For many, a well-constructed plan will protect their assets and their heirs from federal estate taxes, which can take a sizeable bite out of an inheritance. However, a new report shows that taxes are not necessarily the threat for which you need to plan.
The biggest threat to an estate, even one with a plan in place, is family disputes. Nearly half of attorneys and other advisors polled for the study agreed that family disharmony can drain an estate and leave families in turmoil. While there may be no way to dispel all animosity that exists among family members, you can take certain steps to ensure you have eliminated as many sources of contention in your estate plan as possible.
Prepare your estate
Your best efforts to leave a fair inheritance for your loved ones may not have the results you intended. For one thing, what you consider fair may not seem fair to your heirs. For example, if you own a business, you may leave a larger share of that business with the child who showed the most interest in continuing the family legacy, while the other children may receive life insurance benefits or other assets. Your children may feel they deserved a share in the company despite their disinterest.
Some steps you can take to lessen these conflicts include the following:
- Make sure your estate plan is up-to-date and revised regularly, especially after changes in your family.
- Frequently check the beneficiary designations on your life insurance policies and other pay-upon-death accounts.
- Adjust your plan if tax laws change, whether at the federal level or with Texas laws.
- Create a business succession plan.
Because of the changing dynamics of many families, you may need to seek advice about the best ways to provide for ex-spouses, stepchildren and biological children from previous marriages.
Talk it out
If you have included elements such as trusts that hold an inheritance for a certain time or until the heirs reach certain milestones, it is critical that you communicate this information with your heirs so they do not see this decision as punishment. What many estate planning professionals discovered is that 75 percent of the conflicts families experience about their inheritances relates to a lack of communication.
Many heirs have unrealistic expectations about their inheritances, and others may have felt less confused and short-changed if they had heard the reasoning behind the estate planning choices. A skilled estate planning attorney can assist you in creating a solid plan, revising your plan as needed and communicating your intentions to your loved ones.