3. Unequal Distribution Of Assets And Disinheritance
Approximately 60% of Americans surveyed believe that their parents’ estates “should either be divided equally between the children or that the children should each receive an equal value from the estate,” according to BMO Wealth Management’s report. Just 15% of respondents “felt that it would be fair to distribute assets on an unequal basis, with reasons such as financial need or the closeness of the relationship with the child being cited,” says the report.

Uneven distributions of assets can cause serious friction. To minimize the risk of lawsuits, some planners advocate equal or roughly equal distributions to each child.

But unequal distributions can actually be better for heirs in some circumstances. Giving the entire family business to a child who is already operating it may make more sense than splitting it equally among several children.

“If there are three children, two of the children might outvote the third. A minority interest can be worthless if you can’t get along with the other owners,” says asset protection and estate planning attorney Steve Oshins of Las Vegas-based Oshins & Associates.

Those who are not part of the business, or expected to be, can receive other assets. “The business could go to one child, a piece of real estate to the second and life insurance proceeds to the third,” says Oshins.

Unequal distributions of assets may cause some grumbling, but the completely disinherited—especially spouses and children—have almost nothing to lose by challenging estate plans that left them zilch. Still, if the decedent really meant to leave some family members out of his or her estate, that intention should have been thoroughly documented to reduce the probability of a successful challenge. For example, comic and entertainer Jerry Lewis, who died in August 2017 at age 91, reportedly excluded his six sons from his first marriage by name from his will (one son predeceased him). Lewis’s will specifically left all his assets to his second wife and adopted daughter.

If parents truly want to leave out children, Dadakis recommends creating a contemporaneous memorandum separate from the will that thoroughly documents the reasons for the disinheritance. “The lawyer that drafted Jerry Lewis’s will should have a laundry list of Jerry’s reasons as to why he wasn’t providing for these people. The lawyer should have discussed the reasons with Jerry at least once, and maybe twice.”

To further minimize the risk of will challenges, advisors can recommend, and lawyers can include, no-contest clauses. Parents may leave a small, but reasonable, sum to otherwise disinherited children—and if the kids contest the will, they receive nothing. The hard part is determining just how much to leave to encourage them to take the money and run, rather than litigate and risk losing what they’ve been left.

Another solution is to place assets into a revocable trust. Parents would have access to the assets and can change the terms of the trust during their lifetimes. The assets will also bypass the probate process, a plus for wealthy families who don’t want a public record of how much they have and who they left it to.

Disinherited children have limited rights to challenge trusts. One of the few arguments they can make is that their parents weren’t competent to establish the trust. However, the longer a trust exists, the harder it is for disappointed heirs to prevail on this legal theory.

4. (Not-So-Well) Blended Families
Fights over the estates of wealthy people often involve complex family dynamics. Second and third marriages, and additional children from those marriages, can cause deep resentment among original family members, who may see their share of wealth diminish as more heirs are added to the mix.

While sibling squabbles are common, Oshins says the resentment toward stepparents is “by far” the biggest cause of estate battles. In one case where Oshins represented an estate going through probate, the surviving stepfather and his deceased wife’s son racked up $5,000 in legal fees battling over a toaster worth $20.

“The estate was roughly $2 million,” Oshins says. “The surviving husband was really, really nice. He was about 89 years old and in very bad shape. He probably had two years to live. The son who was causing all the fights was in his 50s or 60s. The son was a complete jerk.”

Oshins doesn’t even remember who ultimately got custody of the toaster. But the matter was so contentious that he wanted to personally give the son $20 to “just shut up.”

Armstrong, who has a Ph.D. in psychology, says that fighting over inconsequential items like kitchen appliances is often a pretext for venting larger resentments that original family members may have about incorporating new members, as well as the perceived fairness of asset distribution.

“The object becomes a symbol for the interpretation that the family member is making about what they did or didn’t receive. Those small items really represent the larger conflict,” she says.

Advisors can help clients avoid problems associated with blended families by updating wills and trusts whenever major changes in life circumstances occur, such as marriage, divorce or adoption. Trusts should be reviewed at least once every five years to make sure that the information is current on trustees, beneficiaries, guardians and agents with powers of attorney to make clients’ health-care decisions.