Fisher Mediation
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Benefits of Addressing Conflicts During the Estate Planning Process

by Paul Fisher, Edited by Judith Stalk

This is the second of a multi-part article focusing on when conflicts can be addressed during the estate planning / estate litigation process and the benefits and problems for each of the players in estate planning / estate litigation. The first article discussed the benefits to the trustor. This article discusses the benefits to heirs, trustee and attorneys, and the benefits when there is a family business or divorce and remarriage.

Benefits to the Heirs

In San Diego attorneys comment that addressing heir/beneficiary related issues makes the heirs lives better, reduces conflicts and court battles. Though another attorney comments, “Beneficiaries are like cockroaches; they don’t come out until the lights are out.” In Riverside county, an attorney opines that when heirs feel crushed and their expectations are not met, this leads to conflict.

In San Bernardino county attorneys state that when these issues are addressed during the estate planning process, there are no surprises and it smoothes the transition. Another attorney comments that if a particular type of client comes in with strong ideas about an estate plan, and absolutely wants it carried out without further discussion or no negotiation, holding a meeting with the family during the estate planning process is an invitation to client unhappiness.

An attorney in Fresno county looks at the interests of the stake holders, and emphasizes the benefit of resolution during the estate planning process. An attorney in San Mateo county indicates it is beneficial to the heirs to hear of the trustor’s intentions directly from the trustor. After having personally heard the trustor, heirs can be sheepish to seek changes after death. However, an attorney in the San Fernando Valley indicates that one child may be more persuasive and articulate to the disadvantage of the other children during such a meeting.

Another Los Angeles attorney has experienced that when children have a voice in how property is passed and are a part of the process, it can be very comforting. IE. This attorney has witnessed the relief on the faces of heirs whose parents have arranged to finance the grandchildrens’ educations.

Benefits to the Trustee

The trustor’s choice of trustee can create a big source of conflict. A particularly volatile appointment is the trustee who is related to the trustor. California attorneys have made the following comments: help determine who does not want to be successor trustee. If an appointee knows there could be problems among the heirs, they’re going to want to avoid being trustee. Find someone to serve who is younger and in good health. An attorney in Fresno county always recommends an independent fiduciary. This attorney has no law suits arising from his clients’ choice of trustee. The children thanked him and one commented, “I don’t have a target on my back as the result of having been appointed trustee”.

When my own father designated my two brothers and I, and our mother, as co-trustees, little did any of us consider at the time that each of us had targets on our backs. At least not until my brothers and I sued each other as trustees.

Benefits When There is a Family Business

There are many complex issues surrounding a family business and death of the business owner. Issues include family succession, transition of ownership, and governance as well as other issues connected with the running of a business. This array of sensitive issues begs for discussion. At stake is the future of the family business, generations of relationships and the potential for reduction of sibling animosity. Without these discussions before the key owner’s death, risk of future conflict grows. In the U. S., forty to fifty percent of the family owned businesses will be owned and led by groups of brothers and sisters in the future. Succession and leadership is the key to the future for family businesses. Yet, half of all family firms fail to make it through the next generation. A Chinese expression puts it this way: “Wealth does not pass three generations.”1 “Without deliberate intervention, any conflicts, tensions, disagreements, or dysfunctional patterns that exist in the family environment will be brought into the business environment.”2

Simply put, when there is a family business without a succession plan, the business may fail in the next generation and is not likely to survive the generation after that.

An attorney in the San Fernando Valley observes that it is best to hear Dad’s intent directly from him rather than through various second hand interpretations after his death. Another attorney at the same workshop stresses the importance of discussing with heirs the fact that they may be owning real property investments together. Such an arrangement would force them into a business partnership for which they may have no desire. This practitioner, who was forced into this nearly untenable condition in his own family, urges others to “absolutely discuss these issues during the estate planning process.”

One attorney observed that the biggest disputes arise when the heir who works in the family business and who feels deserving is overlooked in favor of another heir who does not work in the business. The second heir may end up getting the business simply because the first heir stopped coming to Mom’s house for Christmas.

Benefits When There has been Divorce and Remarriage

One-third of estate contests arise from remarriage and are usually brought by children and step-children. I frequently mediate cases between step children and surviving step-parent or between children and step children over their common parent’s estate. Everyone at these mediations speculates that Mom or Dad really wanted them to have the family residence / business / bank accounts / grand piano / you name it. There is a benefit when everyone better understands the testator’s intent and motivations and hears such information directly from the testator.

Benefits to the Attorneys

Many attorneys from around California comment that addressing conflict issues during the estate planning process is a lot more gratifying than estates litigation. For these attorneys the process produces higher personal satisfaction when one’s client’s wishes are carried out, conflicts are resolved while the client is still living; the attorneys can deal with the families, deal with real living people.

There is a particular benefit to the attorney who represents the disinherited or contesting party. That attorney is often on a contingency fee arrangement and does not get paid until the matter is concluded. If a potential conflict is resolved very early, as during the estate planning process, that attorney and client may be highly motivated to reach an agreement, and the attorney may be more flexible with her fee in order to reach a fast settlement. This may be a unique window of opportunity for all the players in the process.

What are the messages?

The role of the estate planning attorney is evolving such that some proactive practitioners see their clients’ needs as including the relational estate. It is likely that over time clients will gravitate to these estate planners.

Clients and their families are growing weary of the culture of estates litigation. Many strongly desire a change away from the default process of probate litigation which is viewed by the family as too financially and emotionally devastating. With time I believe more practitioners will guide their clients toward establishing mechanisms that will best address estate related conflicts at a time more comfortable to the client and in a manner that will better preserve the client’s testamentary intent.

There are great potential benefits for all the usual players in estates litigation who address conflicts issues during the estate planning process. For the trustor there is the peace of mind that litigation will not likely distort or even destroy his plan and wishes. For the heirs there is the comfort of knowing no court battle will ensue after the testator’s death. The disinherited or potentially contesting party can find an early resolution to a potential claim. For the persons who loathe the prospect of serving as trustee, there is the knowledge that they will not have the often risky and thankless task of serving. For the attorneys who represent each of these parties there is the prospect of a higher level of professional and financial satisfaction that comes with happier clients who can avoid the tumultuous path of traditional probate litigation.

All of this of course assumes the players are reasonable and have exercised the level of flexibility necessary to help bring about an early resolution to conflicts.

Next in the series: Does this sound a little to rosy? What are the disadvantages of addressing these issues during the estate planning process?

To read chapter one in this series, “Conflict Management in Family Inheritance Wars”, click here.

Chapter two, “There Has To Be A Better Way: The Value of Managing Estates Conflicts”, click here.

Chapter three, “Is There More To Life Than Death, Taxes and Post Mortem Financial and Emotional Grief?”, click here.

Endnote:

  • 1. Ward, John L., “Perpetuating the Family Business — 50 Lessons Learned from Long-Lasting, Successful Families in Business”, Palgrave Macmillan publishers.
  • 2. Fleming, Quentin J., “Keep The Family Baggage Out of The Family Business — Avoiding The Seven Deadly Sins That Destroy Family Businesses”, Simon & Schuster.