Five Steps to Avoid and Minimize Probate and Trust Disputes
Probate and trust litigation can turn families into enemies and convert inheritances into attorneys' fees. These disputes can fueled by sibling rivalry, blended families, family grudges, financial need, entitlement, revenge, greed, or spite. Litigators have a bird's eye view of the issues which fuel such disputes and are often able to anticipate potential issues before they erupt, so they might be avoided in the future.
Some of us may need help making decisions or caring for ourselves or our finances. Some questions to answer as you select who you may want to act on your behalf if you are unable to act for yourself:
- Who will make your medical decisions and who will pay your bills and manage your finances?
- How much power should someone else have over you and/or your property?
Who can you trust?
In the absence of proper powers of attorney and living wills, court involvement in the form of guardianship and/or conservatorship proceedings may be necessary. Even if the appointment of a guardian and/or conservator is not contested, the court process costs time and money. In some cases where there is no suitable family member to act as guardian or conservator, or if there is too much family conflict, a private fiduciary may be appointed as guardian and/or conservator. In that event, strangers are making your most personal decisions and managing your finances. Such court proceedings offer fertile ground for family disputes, both at the time of the appointment and during the guardianship and/or conservatorship administration.
Estate planning attorneys, accountants, financial management counselors and other professionals can guide clients to secure properly drafted and executed estate planning documents. They will discuss the responsibilities of fiduciaries, and help you make good choices as to whom you appoint as your fiduciary. Pick the person who is qualified for the job, not the person stereotypically named. The person appointed as agent under a medical power of attorney may not be the right person to be agent under a financial power of attorney. A family member is usually the first choice for the fiduciary; however, a family member might not be the right choice. This decision is not about doing what others may perceive as "fair," it is about selecting the right person for the job. The person selected as agent should want to do the job and should be fully informed about the duties and possible risks of accepting the appointment. Alternate or successor agents should be identified as well. In deciding who should be your agent under a power of attorney, a probate and trust litigation attorney can help identify potential issues to plan around particularly if there are already strained family dynamics.
Make your plans in writing with properly drafted and executed wills, trusts or non-probate transfers; do it properly and keep it updated. Think about who is getting what and who is in charge of distributing the estate or trust. Limit disputes over distribution of personal property by making a written list designating the intended beneficiary of each item. Don't limit the list to things of significant monetary value - families will spend huge amounts of money fighting over sentimental objects. Again, there is no obligation to be "fair" to everyone. Make your burial preferences known or designate the individual who is to make such a decision if there is any question or dispute. Many families have litigated over a loved one's ashes.
It is important to select the right person(s) or entity to administer your estate as personal representative or trustee. Consider the following questions when you make your selection:
- Who is nominated as personal representative, executor or trustee of your estate?
- Is that person competent, trustworthy and responsible?
- Will that person's authority be questioned by anyone?
- Does the person want the job?
- Do they know what the job requires and do they have the requisite skills to be successful?
- Does the will or trust sufficiently identify and/or give guidance for appointment of a successor fiduciary if needed?
- Are there enough successors named?
- Is there a procedure for appointing a new fiduciary in the absence of a named successor?
Different issues affect families differently. Challenges such as family businesses and properties, blended families, conflicting burial instructions, overwhelming medical problems and diseases as well as changed circumstances can create a hostile environment. Think about the issues that are unique to your family when planning. Don't assume everyone will agree on everything.
Are the Document Valid?
The validity of wills and trusts may be attacked by those with legitimate and well-founded concerns related to the document's creation and execution. The validity of documents may also be attacked by those who are simply dissatisfied with the estate plan. Wills and trusts may be contested based upon alleged undue influence on the testator or trustor and/or based upon the testator or trustor's lack of testamentary capacity when the documents were signed. Red flag include:
- Were there fraudulent representations?
- Was execution of the will or trust a product of hasty action or was it concealed?
- Was the person who benefited by the will or trust active in securing its drafting and execution?
- Is someone just disappointed they did not get more from the estate and hoping a lawsuit will pressure others to give up some of their inheritance to avoid a legal battle?
- Might someone wrongly attack your mental capacity even though you were competent?
- Think about these potential issues as you are creating and signing these documents.
With increasing frequency, vulnerable adults are being taken advantage of by family members, caregivers, con men, or unscrupulous vendors. Arizona has enacted laws designed to protect vulnerable or incapacitated adults from such financial exploitation.
You can protect your loved ones or friends from exploitation by looking out for danger signs including: the vulnerable adult begins making uncharacteristically large gifts to new "best friends", or a new charity or others. Phone and personal access to the vulnerable adult is suddenly being limited. The vulnerable adult wants to change will, trust or powers of attorney contrary to their long standing estate plan. New professionals are being hired to take the place of long standing attorneys or accountants. Taking steps to recognize possible exploitation early on could save the vulnerable adult and his or her estate significant sums - money that could be used for the vulnerable adult's care.
Post Death Issues
After death, an individual appointed as a fiduciary (personal representative, executor or trustee) has a duty to promptly administer the estate or trust according to the will or trust and to Arizona law. They have a duty to defend valid documents and act for the benefit of all the beneficiaries. Fiduciaries may fail to act promptly to administer the trust or estate or they may improperly take assets. Sometimes beneficiaries and fiduciaries have different interpretations of the same documents (all the more reason to take care with the preparation of the estate planning documents). Any of these scenarios can lead to litigation.
All parties have a duty to protect their own rights - if you ignore the problem, it will not necessarily go away. If you ignore potential issues for too long, you may be legally barred from raising them later.
Probate and trust litigation can be expensive both financially and emotionally. Such litigation can take a substantial amount of time and can delay and reduce inheritances. Some litigation can be avoided through good estate planning. Even if probate litigation is started, the manner in which it is handled can greatly impact its speed and cost. An attorney with specific experience in probate and trust litigation will be helpful to you if you find yourself or your family embroiled in a probate or trust dispute. Do yourself and your family a favor by preparing (and updating) a good estate plan after thinking through all the potential issues that might arise. While you are creating your estate plan, consulting with an attorney with experience in probate and trust litigation in conjunction with your estate planning attorney can help identify potential issues and so precautions may be taken to try and avoid future disputes.
About the author: Lauren L. Garner is a partner at the Phoenix law firm of Jaburg Wilk. She handles probate and trust litigation matters and has significant experience representing families, fiduciaries and vulnerable adults in Probate Court.