WILLS, TRUSTS AND ESTATES NEWSLETTER
OCTOBER 3, 2017
9 Ways to Protect Your Estate from a Lawsuit    

Of all the things we plan to leave our families, a lawsuit surely is not one of them. Before you say, "My family would never..." consider how many lawsuits in court now involve decedents who thought their relatives would never sue one another. Probably the vast majority. Remember that one can never under estimate the power of a spouse or financial desperation where significant money might be involved. Thousands of suits are filed every year and families torn apart because enough care was not taken when drafting an estate plan to build in these essential protection strategies:

1. Treat children equitably.
If you favor one child over another or bypass children altogether with no explanation, you are asking for litigation. Heirs will fight when they perceive they have been treated unfairly, so strive for fairness in your estate plan. "Equitable" does not necessarily mean "equal." But if you are not treating all children equally, it is worth your while to explain the reason in writing. A common example might be a child who works full time at the family business. Maybe it is actually unfair to divide that business equally among all children. Maybe that should get 51% and the others should share in the additional 49%. But if in your case "equitable" does not mean "equal," you should explain the reasons for the unequal distributions in your trust. A little explanation can go a long way.

2. Make decisions about personal property.
Many times a will or trust will specify simply that personal property be divided among family members "as they shall agree." Unfortunately, the reality is that many times they do not agree. Make a list of your personal property and designate who gets what in your will.

3. Designate disposition of loans or advances.
If you plan to forgive a loan to a family member, you need to clarify that in your estate plan. If you have gifted a child some cash as an advance on their inheritance, be sure that amount is noted as counting against the share in your will or trust.

4. Use a contract to transfer business ownership. If you want to transfer your ownership in a business to one child, consider using a contract to sell the business interests to him or her while you are still alive.

5. Make sure you own what you bequeath. Sometimes people try to bequeath property like a vacation home that is already held in joint tenancy. When property is titled as joint tenancy property, the joint owner receives it. NOTE: Not all joint ownership is the same. Joint tenancy ownership is very different from tenancy in common ownership. Those named as beneficiaries on your retirement accounts or life insurance policy will receive them, even if you have named someone else in your trust.

6. Consider a professional fiduciary or corporate trustee. If you anticipate there may be problems with your estate after you are gone, consider naming a professional/corporate fiduciary to act as trustee instead of a spouse or child so abuse of power is not a real or perceived problem.

7. Establish your mental capacity.    One of the most common grounds for legal challenges is lack of mental capacity. If you believe someone might challenge your trust on the grounds of lack of capacity, you should have an independent attorney interview you and create a certificate of independent review, certifying that you understand what you are doing and that you are disinheriting someone or leaving property to another, as the case may be, intentionally and willingly.

8. Have a "no contest" clause.    You can have a "no contest" clause added to your trust that stipulates that any beneficiary of the trust who contests your trust's validity forfeits his or her interest. Of course, a no contest clause is worthless if you are not planning on giving the potential contestant anything. This is often hard for parents to swallow, but you must leave something to the person you want to disinherit in order for the no contest clause to have teeth.

9. Spell out any disinheritance
. If you intend to disinherit a child, you need to make it clear that the disinheritance is intentional and spell it out in your will. Most experts advise not to provide a reason, since the reason itself could lead to a legal challenge. If you think spelling out the disinheritance will unnecessarily fan the flames, you should make sure to identify the disinherited person in your trust (e.g., "My daughter, Jane Jackson, was born on January 1, 1988.") and then later to include a clause saying that you have intentionally disinherited anyone not provided for in your trust.

SIDE BAR: There are other strategies that can be used to mitigate and hopefully eliminate the potential for litigation in settling your estate. You should consult with an experienced estate planning lawyer to help you devise the strategy that addresses your particular concerns.
Gadi Zohar Intro Video
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