The late California Senator Dianne Feinstein’s legacy was tarnished by a series of lawsuits filed before her death. The lawsuits exposed rifts within the family and flaws within the estate plans of Feinstein and her late husband.
Feinstein’s late husband Richard Blum, a wealthy investor, died in February 2022. Both Blum and Feinstein were on their second marriage and every had children from previous marriages.
After Blum’s death, the senator suffered several health setbacks before passing away in September 2023.
A number of months after Blum’s death, Feinstein’s daughter filed several lawsuits in her role as an agent under Feinstein’s power of attorney.
The lawsuits had different complaints and involved different trusts. The details and any resolution aren’t essential here.
The suits are one other example of what is typically known as “heir wars.” Children and sometimes other relatives fight over an estate. The fights often begin after certainly one of the principals dies, but also can begin when certainly one of the principals appears to be having cognitive problems.
Heir wars are more likely in blended families with children from previous marriages. But they will occur in any family, which has different personalities with different interests and ambitions.
Parents are sometimes unaware of impending heir wars since the extent of conflict, grievances and resentment is suppressed until no less than one spouse has died. Only then does the lid open and reveal the depth of the differences.
Most inheritance wars are avoidable if parents take the suitable steps of their estate planning.
A family doesn’t should be wealthy for heir wars to interrupt out. Most estate planning attorneys report years-long disputes over property or matters that appear insignificant and of little value to outsiders. Emotions and personalities are more essential aspects than wealth.
The most vital measure is for fogeys to think about and anticipate possible conflicts. There are several elements to think about.
It is vital to acknowledge personality differences or conflicts between members of the family and anyone else who might consider themselves potential beneficiaries. Differences that appear minor when each spouses are alive often turn into more pronounced after the death of 1 or each spouses.
Parents also have to avoid conflicts with the main points of the estate plan, akin to the terms of estate distribution.
In the Blum-Feinstein case, several of the trusts had built-in conflicts. After Blum’s death, Feinstein benefited from the trust assets. Anything distributed from the trust funds was either spent on her or passed into her estate. Her estate would go to the youngsters from her first marriage.
But assets that remained within the trusts after Feinstein’s death went to the youngsters of Blum’s first marriage.
Under these terms, Feinstein and her children benefited when funds were distributed from the trusts, but Blum’s children benefited to the extent the assets remained within the trusts.
Many estate plans have similar trust beneficiary conflicts that have to be identified and corrected.
Another common conflict occurs with estates where property is difficult to value or has sentimental value.
When assets are divided, the heirs disagree concerning the value of the items and consider that one heir receives more value than one other. Or an item could have significant sentimental value to no less than one heir, resulting in a dispute over who should receive it.
Estate planners have many tools at their disposal to take care of these situations and reduce the conflicts, or no less than reduce the potential for the conflicts to show into outright heir wars.
The first and most vital tool is communication. This is where many property owners fail.
The heirs needs to be told how the estate needs to be distributed and what the parents’ wishes are. This reduces the potential for arguments because everyone knows the expectations.
Communication also reduces the danger that heirs will likely be disenchanted or surprised by the plan. Most estate disputes arise when the heirs are surprised by some a part of the plan.
Explaining the plan upfront also gives the beneficiaries the chance to comment on it and explain their expectations or conflicts that the parents may not have taken into consideration.
When assets are difficult to value or sentimental, it will be significant to tell heirs upfront of the planned distribution of those assets. This, in turn, is a chance for the heirs to specific their thoughts and expectations in order that differences and conflicts will be resolved and incorporated into the plan.
If communication doesn’t appear to resolve the potential conflicts, there are other options.
One solution to reduce conflict is to instruct the estate or trust to sell most assets, particularly intangible assets, and distribute money. Some estate owners decide to liquidate such assets during their lifetime or to prearrange sales or gifts that may occur mechanically upon their death.
When assets are held in trusts, property owners and their planners should consider various scenarios when deciding on the terms of the trusts.
For example, many trusts now authorize the trustee to carry a diversified portfolio and invest for long-term returns, referred to as a complete return trust. The life beneficiary receives distributions as much as a specified dollar amount, a percentage of the trust value, or whatever is mandatory to satisfy his or her needs, as determined by the trustee.
When deciding what to distribute, it just isn’t mandatory to categorise the cash within the trust as income or capital. This eliminates a typical source of conflict.
The worst mistake property owners make is saying, “They’ll figure it out.” A variation is, “It won’t be my problem.” These sentiments often result in tarnished legacies and wasted assets.
Failure to take steps to attenuate potential conflict can divide a family and enrich lawyers relatively than heirs.
