In early 2015, Tom Benson, billionaire owner of the New Orleans Saints and Pelicans, announced he was removing his granddaughter, Rita LeBlanc, as heir apparent of his NFL team and replacing her with his third wife, Gayle Benson. He fired his relatives from their jobs at his companies and banned them from any further contact with him. This began a multi-year court battle among Mr. Benson’s relatives over his mental capacity, the value of his sports teams, and his ability to replace assets in irrevocable trusts. It was the juiciest of billionaire family feuds for the media, but also a sad split between Tom Benson and his only living daughter and grandchildren.
High profile fights over large estates garner a lot of media attention. From Anna Nicole Smith claiming her husband of 14 months and 62 years her senior, Howard Marshall II, claimed he wanted to leave her half of his $1.6 Billion estate, to Leona Helmsley leaving $12 Million to her dog, affluent families have fought over money to the bitter end. Anna Nicole Smith’s case is before the U.S. Supreme Court for the second time, even though she died in 2007.
Contested estates are not unique to billionaires or trust fund heirs. Regular folks, even those with proper estate documents, are susceptible to family fights. What can be done to prevent your heirs from coming to blows over your estate?
Even though most people don’t like to think about dying, much less tell their family members about their estate plan, communication is the first line of defense in preventing a family feud. If your heirs understand your wishes, and more importantly, the reasons you made your estate decisions, they are more likely to accept the outcome. Not every family leader chooses to leave assets to their children and grandchildren equally. Sometimes they prefer to leave more to a child with lower earnings, to a divorced child who is a single parent, or to a child with special needs.
Family-owned businesses are a prime example of uneven estate distribution. If one member of the second generation will own and operate the business, there is no guarantee that assets left to other heirs will be equal to the business valuation in the future. It’s appropriate to have a family meeting with all the siblings to explain the rationale for distributing ownership of the business. This is a good time to discuss the possibilities for the future value created by the business and that it does not guarantee that all siblings will end up with equal wealth at the end of their lives. Hopefully this conversation can deter sour grapes.
Another sticking point may be spouses (potentially future ex-spouses) of adult children. It is not uncommon for families to require in-laws to sign pre-nuptial agreements protecting estate assets. In a community property state like Louisiana, heirs may elect to keep inherited assets as separate property, but not all heirs understand how to properly title separate assets and avoid commingling.
Communication is key, even though it makes most people uncomfortable to tell their family members the contents of their will. Another, less optimal, option is to leave a side letter with your will, that explains your intentions and motivations in your own words, rather than legalese. It’s also important to get your estate documents in a row. If you haven’t reviewed your will in several years, or if you’ve had a life change, including marriage, divorce, or birth of a child or grandchild, you should make an appointment with your estate attorney.
Don’t miss a few of the basic estate planning errors. Remember that retirement plans, IRAs, annuities, and life insurance contracts transfer by beneficiary designation, not by the instructions in your will. Check your beneficiary designations often and update them as necessary. Minor children are not legally able to inherit property in their name. It’s best practice to leave assets to minor children in trust, otherwise the court must appoint a guardian to care for the assets. In community property states, be wary of leaving real estate property to multiple parties. It’s never fun when adult children own small pieces of mom’s house and cannot agree on when and how to sell it.
Money is hard to talk about with family members. Discussing what happens with your money after you die is even harder. If you love your heirs and want to prevent them from fighting after you are gone, an honest conversation about your intentions goes a long way.