Prudent Estate Planning Helps to Avoid Family Brawls
How often have you heard about a family feud occurring after the passing away of a family member?
It is very common – and it’s generally caused by lack of proper estate planning which addresses the allocation of assets after death.
Making a Will is very important as it gives the estate owner the relief and assurance that after his death his property will be distributed as per his wishes and instruction as documented in his will which was prepared whilst still alive.
One of the main purposes of your Will has to be to avoid unwanted and undesirable disputes among your progenies.
All of them must get their legitimate share of assets as per your Will. If it’s done properly, there should be no altercation between heirs!
While chalking out your estate planning, you have to figure out:
Take of all of your assets into account, including your bank accounts, your business, residential or commercial real estate, jewelry, costly antiques and every thing that has substantial monetary value.
- Appoint an attorney and consult with him / her to understand how to discern your portion of joint marital property and separate it from any joint account you may have in place with your spouse.
- If you have a business, clearly state the assets of the business plus any contrary splits in equity you would like to apply if you plan to distribute a portion of your equity to long term employees who helped you build your business.
- If you have partners in the business, consult an attorney to ensure that your equity and status in the business is clearly defined and how it can be separated from your partners interests (a similar exercise to handling joint assets from your marital situation).
Debt / Expenses:
- Calculate all your debts and liabilities, including insurance payment on any of your back taxes.
- Ensure that your Will states clearly that all debt will be paid by your estate before any distribution to family members so that your family are not burdened with this task.
- Allow for the cost of probate administration associated with your Will.
- If you have a business, ensure your heirs have access to all documentation relating to the business and can gain an independent assessment of the value of the asset.
Once you have determined your assets and liabilities (i.e. debt and expenses), make a draft of will provision to determine exactly what is available for distribution and how you propose to allocate this.
Bequests to Not-for-Profits:
- If you have extra assets left after your proposed distribution, you may like to consider contributing these assets to a not-for-profit organization.
- If you have no heirs or have disassociated yourself from all heirs, then you may like to bequeath your entire estate – or the vast majority of it – to a Not-for-Profit.
- Speak to the Not-for-Profit before you make a bequest as often they will accept allocation of a bequest for a specific purpose – e.g. 50 extra computers in a school.
- Remember that your heirs may contest your will if you bequeath it all to a not-for-profit so be very careful in how you structure your will if you decide to do this. The last thing you want is to embroil a not-for-profit in a dispute.
I recommend you consult a tax consultant beforehand as there may be tax consequences associated with making gifts to some not-for-profits and this may diminish the associated benefits.
Key Action Steps:
- Prepare your Will as soon as possible – don’t wait until your health deteriorates to a point where family members can contest a will based on grounds of “not being of sound mind”.
- Update your Will on a regular basis.
- Appoint an independent executor – ideally this should be an attorney as there is less chance of a dispute when an attorney serves in this capacity.
- Make sure everything in your Will is totally transparent and begets lots of interpretations in the court, hence minimising the likelihood of a contest by one or more family members.
Please remember that there is nothing more tragic than when your wishes are not upheld and the right person is deprived of their legitimate share.
Have you prepared or updated your Will recently?