“Get a Trust,” they say.
But the reality is quite disturbing: Over 70% of Estate Plans cause a dispute or end up in Litigation!
So what is the cause?
Every time you open AARP’s magazine, the local paper, or meet with your financial adviser, you are told to create a “Proper Estate Plan.” You have taken all this advice and acted. You paid lots of money, went through a somewhat arduous process, and now you have a Trust. Your advisers told you it is best to ensure your assets are distributed according to your wishes after you’re gone.
But did they overlook an essential part of all this planning?
Who ensures your wishes are enacted?
While laws govern how trusts are created and how their trustees must act, what agency enforces those laws? The dirty little secret is there is effectively no enforcement. Imagine a world where traffic laws had no mechanism enforcing drivers to obey the laws of the road and no patrol cars busting speeders and drunk drivers. It’s just a bunch of laws that no agency has the time or funding to enforce.
There is currently no law enforcement agency protecting Trusts.
Because there are no radar guns on the highway to enforce speed limits in the realm of trusts, many people must realize that even the most carefully crafted estate plans can become battlegrounds for family disputes and legal contests. The likelihood of an estate plan ending up in Litigation after death might be higher than you think.
A recent American College of Trust and Estate Counsel (ACTEC) study shed light on this alarming trend. According to the survey, nearly 70% of estate plans face some form of dispute or Litigation after the planner’s death. This staggering statistic should be a wake-up call for anyone considering or managing their estate plan.
What exactly causes these posthumous family feuds and courtroom battles? Several factors come into play:
No Document Version Control
The number one reason these disputes are on the rise is that up until earlier this year, there was no existing central registry for legal agreements like a Trust. There is no state agency, like a DMV, that keeps track of trusts and any amendments. There is nothing in the private world, either. No law firms, banks, or brokerages keep track of trusts. Each entity operates in a silo, manually reviewing documents submitted by clients to open or change accounts.
But what happens if a scammer fraudulently prints off those documents, attempting to access your investment account falsely? Does the bank’s internet portal know if the submitted amendment is legitimate?
The fact is that financial institutions, courts, and title companies are all left to their own devices regarding how to authenticate a trust document.
And when it comes to time, and you’ve died, the lack of document registration opens the door to Litigation – expensive, ugly, family-destroying Litigation.
Ambiguity in Estate Documents
Another reason for disputes is ambiguity or vagueness in the language of the estate planning documents. More precise instructions regarding asset distribution, beneficiary designations, or the role of trustees can create clarity and resolve disagreements among heirs.
Family Dynamics and Expectations
Every family has its dynamics, which can influence how estate matters unfold. A reasonable attorney will attempt to write the trust so sibling rivalries aren’t provoked. But they aren’t magicians! Simple mistakes should be avoided. Provisions such as unequal distributions or perceived favoritism by the deceased can fuel resentment and lead to expensive legal challenges.
Complex Family Structures
Blended families, multiple marriages, and children from previous relationships can complicate estate planning. In blended families, skillful estate planning attorneys can genuinely help define intent. Improperly describing rightful heirs and navigating relationships between stepchildren, ex-spouses, and biological children can often result in contentious disputes.
Allegations of Undue Influence or Lack of Capacity
In some cases, disgruntled heirs may contest the validity of the estate plan itself, alleging that the deceased was unduly influenced by another party or lacked the mental capacity to make sound decisions regarding their assets. These cases are not only expensive to litigate, with legal fees running into hundreds of thousands, even millions of dollars, but leave families wrecked, often unable ever to overcome the ugly nature of such fights.
The consequences of estate disputes and Litigation extend beyond financial costs. Family relationships can be irreparably damaged, leading to long-lasting emotional distress and estrangement among loved ones. Moreover, the legal process can be protracted and expensive, draining the estate of valuable assets that would otherwise go to beneficiaries.
So, what can individuals do to minimize the risk of posthumous disputes over their estate plans?
- Register and Authenticate the Estate Plan
Paper documents can be lost, stolen, destroyed, and defrauded. In today’s digital age, having agreements on paper is akin to building a home without door locks. It invites disputes, Litigation, and fraud.
- Don’t jump over a dollar to save a penny.
You spent thousands on trust, and your estate is worth hundreds of thousands if not millions. Protect your trust and your legacy by digitally registering it with illuminote.
- Seek Professional Guidance
Consulting with experienced estate planning attorneys and financial advisors can help ensure your estate plan is clear, comprehensive, and legally sound. Professionals can navigate complex family dynamics and provide solutions tailored to your circumstances.
- Communicate Openly with Family
Transparent communication about your intentions and the reasoning behind your estate plan can help manage expectations and reduce the likelihood of surprises or misunderstandings among family members. Digital registration can assist in this communication. The system employed by illuminote (called DARCi) uses dual-factor authentication and allows for simple alerts to trusted persons and advisers, improving communication and creating evidence of your intent.
- Regularly Review and Update Your Plan
Life circumstances change, and so should your estate plan. Regularly reviewing and updating your plan to reflect major life events such as marriage, divorce, births, or significant changes in financial status can help prevent disputes down the line.
In the end, Estate Plans are here to Avoid Litigation.
In this digital age, there is no longer any excuse for paper documents, manual reviews, or disputes about who has the latest version. Legal tech solutions like The DARCi Registry by illuminote offer an easy, inexpensive way to prevent ambiguity. Authentic Trust records are registered on a secure, central database in adherence to CA Probate Code 15402, offering managed access privileges for stakeholders to get relevant information when needed. Thus, you can protect your intent, the integrity of your estate plan, wishes, and costly disputes.
Ultimately, estate planning aims to provide for your loved ones and fulfill your wishes after you’re gone. Understanding the potential pitfalls and taking proactive steps to mitigate risks can help safeguard your legacy and minimize the likelihood of posthumous family feuds and courtroom battles.
The article was written by Matt Everson, CCO – illuminote
