How to Avoid Family Conflict When Transferring Intergenerational Wealth

Family conflict can be an unfortunate byproduct of transferring intergenerational wealth if your estate plan does not properly address the risk. Thankfully, we usually hear from our clients that they don’t have any concerns with their kids getting along after they are gone. However, any estate plan is incomplete if it is does not anticipate and mitigate the risk of family conflict. There are some steps that families can take to reduce the risk of unwanted family conflict and ensure a smooth transition of wealth.

Share Your Plans

First, it is important to plan ahead and have a clear estate plan in place that takes into account your wishes and each family member’s financial objectives. Are there certain assets you wish to see go to a specific person? State that! Should those assets be subject to the costs of administration? State that too! Should those assets be responsible for the proportionate share of estate taxes? Yep, that needs to be in black in white also! If your estate plan does not address these concerns, the family will need to agree among themselves. If they disagree, then your estate plan will be subject to the courts and default provisions under Minnesota law.

Second, it is important to consider all potential heirs when making gifting plans. Establishing trusts for descendants, such as grandchildren, may provide extra security and ensure that their needs are taken care of over time. Consideration of how assets will pass from generation to generation should also be taken into account so that all parties understand who will receive what and when. If your estate plan does not address what will happen if an intended beneficiary dies before they receive their inheritance, your estate plan will again be subject to family agreements (or disagreements), the courts, and the default provisions under Minnesota law. Your estate planning attorney should walk you through each of these decisions when you are designing your estate plan.

Third, your estate planning attorney needs to know about sensitive topics such as financial irresponsibility, drug or alcohol dependency, troubled marriages, wayward children, undocumented family loans, and unknown heirs. By not making a plan for these difficult situations in the estate plan, it is only pushing off the problem onto your family to resolve without your input. Your estate planning attorney should be asking about these situations and helping you make a plan to address them.

Plan Accordingly

Finally, you should be sure that the way in which assets will pass is the best way to avoid family conflict. While a beneficiary designation or transfer on death deed can allow assets to pass easily to the person named as a beneficiary, there are some potential pitfalls. For example, if there are seven beneficiaries listed on a transfer on death deed, all seven beneficiaries plus their spouses will need to be in agreement on hiring a realtor, signing a purchase agreement, and attending closing when the house is to be sold. It can be difficult for 14 people to agree on anything, let alone something so significant! Not to mention, someone still needs to take responsibility for contacting the realtor, cleaning the house, engaging the attorney for title services, and everything else that it takes to sell a house. In this situation, it might be more appropriate to have a personal representative or trustee named to handle all of this. Your estate planning attorney should be thinking ahead on how your estate will actually be administered and whether the plan is best suited for reducing delays and unnecessary expenses.

By following these suggestions, individuals and families will be able to more easily navigate estate planning avoid potential conflict down the line. Proper estate planning covers every angle which can ultimately help bring families closer together by ensuring healthy communication about finances throughout generations in a respectful manner. Your estate planning attorney should be an integral part of helping you achieve these goals.

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