Every adult child’s worst fear is having an inheritance stolen away from them. Fortunately for most, it is not that common. However, for those going through a tumultuous probate, all the travails can be a headache you didn’t ask for. Here are some tips for how to respond when a will is challenged.
But before we get into the blog…
We are financial advisors in Morristown, NJ, providing financial advice for New Jersey residents as well as folks across the country. As we get started, you may want to check out these financial planning blogs we’ve written:
Help! I got named as a trustee
Help! I got named as executor of a will
How to get through probate (without draining your bank account)
Filing your tax return: traps to avoid
Do I have to pay taxes on an inherited annuity?
Let’s go!
What it means for a will to be challenged
Before we get into the technical aspects of will disputes, let’s talk about how it all starts.
Let’s take it from step one: what is a will?
A will is a legal document that specifies the intentions of a person in terms of how their assets are going to be distributed after death. It also voices their preferences for final wishes such as burial, etc. Read about blog about estate plans to learn more.
Are these preferences binding and final? Not 100% of the time.
If somebody feels they were treated unjustly by the decedent’s wishes, they can try to intercede and block the instructions stated in the will from being executed. This process is called probate. The dissenting parties take the beneficiaries to probate court, challenge the will, and try to wrestle these assets away from the person they were originally intended for.
How likely are they to win?
That’s where the estate planning your parents (hopefully) did or didn’t do comes into play.
The likelihood of someone succeeding in challenging a will has a lot to do with the type of legal structure in which the assets are held. For example, if the assets are held in a certain type of trust, it can be a lot harder to win the dispute.
Although we’d love to envision a world where somebody passes and heirs are peacefully able to work things out, the reality is that these disputes do occur quite often. Be prepared to battle, if you have to.
Here’s what we recommend.
Get a good lawyer
Our first tip is to get a high-quality lawyer.
The executor pays the legal fees for probate disputes out of the estate. Try to eliminate or reduce these conflicts as quickly as possible, to avoid having your inheritance drained by legal costs.
Make sure you find quality counsel to defend you as the executor and the will. You need an attorney specialized and experienced in this type of dispute. There can be a temptation to DIY to cut costs, but if the probate process drags on and on forever due to a lack of legal prowess, in the long run it may do more harm than good.
Beware of conflicts of interest!
When somebody challenges a will, things can get pretty tense, time-consuming and (worst of all) expensive. The complexifying factor is conflict of interest.
A conflict of interest materializes when loyalty becomes confused or divided. For example, let’s say your parents’ will is being challenged and you hire a lawyer using funds from the estate.
Important to note: that attorney works for you, not for any other beneficiary.
If a challenging party in the case, such as your long-lost cousin who suddenly shows up once he smells money, calls up that attorney to discuss a point, the bill should not go to you. Make sure in the engagement letter it’s clear that the attorney is not allowed to handle other parties’ affairs on your (and your parents’ estate’s) nickel.
Some attorneys just want more billable hours and will talk to anyone. Get it straight in writing that you are the only client of this engagement if you want to avoid the trust assets being squandered away by attorney fees.
Protect assets prior to their passing
One tricky little thing that tends to happen, and we unfortunately see this all the time, is that valuable assets tend to wander off once the decedent enters the hospital for their final days. Before they become seriously ill, get a sense of what the valuable physical assets are and be prepared to sanction them off – before they mysteriously vanish.
Jewelry, artwork, heirlooms, clothing…
Even if the assets are not earmarked for you, if they are named in the will as part of the inheritance to be passed on to a beneficiary, it’s a good idea to get them to a safe place before they grow legs and wander off.
Did we help quell your fears about a will being challenged?
We are financial advisors in Morristown, NJ serving the local community and beyond. If you have questions about how to invest or manage an inheritance you are getting, how to retire, how to create a financial plan, or (like us) are just plain old Bruce Springsteen fans, reach out and send us a message.