10 Ways to Lawsuit Proof Your Estate!
Estate planning is done to protect your assets along with securing the future of your family and loved ones. You spend your whole life in accumulating significant wealth to make your family financially secure and the rest of the time to protect your wealth from probate, taxes, and creditors. However, you forget one aspect of protecting your assets and that is from your own heirs as your assets can be lost very quickly in the lawsuit. It is quite common that the inheritors have a dispute over the estate of a deceased testator after he/she has left an estate plan which may lead to litigation.
The inheritors have various reasons to contest your estate legally due to uneven distribution of assets which leads to jealousy, greed, disagreement, and rivalries in the relationship. Also, there are other circumstances as well that may lead to lawsuit of your assets such as if you file a divorce or bankruptcy, etc. Most people don’t consider such situations until they occur which led them to lawsuit and thus loss of their assets. Lawsuit may lead to various troubles like wastage of time, privacy hindrance, loss of money and dirty laundry comes in public eyes, broken relationships, etc.
Fortunately, you can avoid such circumstances by making your estate plan a lawsuit-proof or at the nominal, can decrease the chances of fights between your inheritors. Below listed are the 10 methods to help you in doing so:
10 Ways to Lawsuit Proof Your Estate-
1. Treat your children equally:
The very basic method to prevent estate lawsuit is by treating your heirs with the same degree of relationship with you equally. It means that you must ensure that you have left an equal amount of wealth to each of your kids or any other kind of relation class. If you have step children, then they should also be treated same as your children according to the court’s default rule. If one of your heir pass away, you must ensure that his/her share must be provided to his/ her children (if any) or spouse. In such cases, there are very low chances that the heirs will get anything by lawsuits and thus they will avoid it.
2. Decide distribution of certain assets:
Many people mention the distribution of corporeal assets according to the heirs’ agreement. However, this may also lead to lawsuit as you might have promised to give certain thing to specific heir and hasn’t mentioned in written form then after your demise the inheritors might fight over that. Hence, it is advised to list specific things you want to provide to any particular inheritor in your will or trust as clear as possible. Another way is to gift that particular thing to that person while you are alive. However, it is to be noted that depending on the value of the gift, you will be liable to pay a gift tax on it.
3. Prefer trust:
As the trust avoids probate after you pass away while a will pass through probate. By setting up and providing funds in the trust during the lifetime, probate can be easily prevented and thus lessen the chances that either of your children will go to the court readily.
4. Pen down your letter of instruction:
Apart from instructing your representative regarding the details about administration and management of your assets, you can also explain the reason behind the planning your estate the way you did. If there is unequal distribution of the assets, you can explain the reason in your letter of instruction and it can lead to reduction of chances of that your kids feel cheated by other kids.
5. Inclusion of “no contest” clause:
An effective and valid tool to avoid estate lawsuit is the “no contest” clause especially if you think there is some conspiracy. The clause mentions that if any of the beneficiary contend for the validity of the will or any of its provision then he/she will seize their own interest. You can also set an amount as penalty on the people whom you think can cause trouble.
6. Pen down any disinheritance:
If you want to disinherit any of your relatives from your property then it is mandatory to describe it in your will, clearly that it was intentional. However, you must ensure that the reason provided by you, should be such that it can’t be challenged in a state court and the court will identify it as a public policy. Also, there are some relations which you can’t disinherit like if you have a minor child, your mate barring a valid prenuptial agreement.
7. Follow your loans and advance:
If ever you loan money to your child/children then it must be ensured that you must have it penned down in your will that if the loan is to be pardoned or disbursed at your demise. It means that if you have equally shredded your assets among your children and already gifted a child some amount then you must mention it in your will that the gift is advancement and thus can avoid the court proceedings.
8. Contractual business transfer:
If you have a family business that is co-owned by your children or relatives, then this can lead to a dispute in your estate plan if you transfer it to one of your children in a will as the others will feel cheated. Hence, to avoid such a situation it is advised to sell your family business to your son through a contract during your life instead of transferring it through a will or trust after your demise. Being more difficult to challenge, a contract can avoid the dispute after you pass away
9. Ensure your ownership on assets:
Sometimes you might end up by leaving your heirs with something that you don’t own by yourself like a family business, the property you own jointly and accounts (insurance, bank account) which have someone else designated as beneficiary. Hence, it is important that you must verify if your listed assets are owned jointly and if beneficiary are named properly. If you don’t ensure this, it may lead to lawsuit after your death.
10. Set up your mental eligibility:
Many times the estate plan is challenged by putting the allegation that the deceased/testator was mentally incompetent to sign such documents. To avoid such allegations, you must get yourself evaluated by both a treating physician and a geriatric psychiatrist before signing the documents. You can also have a video recording of the signing ceremony to avoid any dispute later.
As we are aware that estate planning is a must, and we need to deal with it, may it be, sooner or later. Hence, it advised to plan your estate while you are healthy to avoid any temptation from anyone and while taking help from an estate planning lawyer.