Business Litigation Alert: "Avoiding Estate Litigation: Preparation and Planning Can Prevent a Legal Mess"
A recent lawsuit – highlighted in the New York Times and Washington Post – over the ownership of several Monet paintings (valued at $30 million) bequeathed by Huguette Clark, the last surviving daughter of American copper magnate and politician William A. Clark, serves as a good reminder of the need for business owners and entrepreneurs to undertake and maintain proper estate planning.
Not surprisingly, many of us put off estate planning either because we don’t want to think about it, or we think we’ll have more time to deal with it at some point “down the road.” But the truth is that the more you prepare and plan early on, the better you can ensure that your affairs will be fully in order for your heirs.
It is that careful preparation and planning that can help your heirs, and even your business partners, to avoid the legal disputes that often arise with poorly managed estates. As the Huguette Clark example illustrates, these disputes can be very messy and they often escalate very quickly.
There are many factors to consider when estate planning, but some of the most important points are outlined below:
- Timing is important. Many disputes arise when an individual signs a will shortly before death or when an age-related decline in cognitive abilities is beginning to show. The will can be contested based on the person’s mental capacity at the time it was signed. Creating your will early and updating as necessary throughout the years can help to prevent this problem.
- Important Family Assets. Dividing an estate “unequally” among heirs also leads to many disputes. Suppose you own a lucrative family business and have one adult child involved in the business, while another adult child is working as a schoolteacher. Giving all of the business to one child would be unfair to the other child, while simply dividing the business between the involved and uninvolved children could be a recipe for problems down the road. These situations require careful planning to determine the best way to “equitably” divide the estate while providing for a good business succession plan.
- Who’s in and who’s out? Challenges by distant relatives are also fairly commonplace, particularly when an individual leaves everything to charity or has no children of his or her own. This can lead to far off relatives coming out of the woodwork to try to stake their claim.
- Add in protections. There are steps that you can take now to help prevent estate litigation later. Using a no-contest clause, putting assets into a revocable trust, and creating a good business succession plan are just a few examples of steps that can reduce the risk of estate litigation.
While there is no completely certain way to avoid estate disputes, taking the time to plan and prepare today can help protect your estate from costly disputes later and leave you with peace of mind.