Executor of a family estate? Here's how to avoid infighting over inherited wealth
After a loved one passes, one of the biggest hurdles families face is passing wealth onto the next generation. Unfortunately, family dynamics can spur conflict and infighting among descendants.
Over 75% of advisors polled by Key Private Bank said that the hardest part of estate planning is navigating interfamily dynamics, according to a survey released in 2019. The bank surveyed 130 of its client-facing advisor about their experience with individuals engaged in estate planning.
"The sensitivities of talking about estate planning often present emotional hurdles to putting a plan in place — especially when multiple marriages and blended families are involved," stated Karen Arth, head of trust with Key Private Bank, in the survey release.
Mariana Martinez, a family dynamic consultant with Wells Fargo Private Bank, who holds a doctoral degree in psychology, has seen countless family conflicts and says that many of issues stem from miscommunication. Dialogue is a two-way street and Martinez says that the older generation needs to invite their child into the conversation.
"There is a lack of clarity and transparency from generation to generation. The older generation thinks they did everything right from wills and trusts but often they didn't explain their reasoning to their child and didn't give their children time to offer input."
Martinez gave the example of a father leaving the family farm to his children, thinking he had done everything right, from leaving money to maintain the farm to legal documents. However, the children did not want the farm and instead wanted to sell it. Disagreements broke out and soon the family was embroiled in a dilemma.
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There are ways to prevent drama, as well as ways to remedy conflicts already started.
Martinez says it is vital to start communication while everyone is alive. "When you talk about the transfer of wealth you are talking about death, they are tied together. But this conversation is not about death. It's about creating an open dialogue with the time you have together to avoid making decisions when there is an emergency."
No one is eager to talk about death, not children or parents. Martinez recounted the story of one of her clients who brought up the conversation with his children, and all benefitted. "He said after they were finished that 'it took the sky away, we could talk about it (death) openly.'"
What to do when conflicts arise
After someone passes they may leave an entire estate, with a lifetime of items to family, but many of these items might not be listed in the will, with living heirs left to divide them up amongst themselves. Conflicts around sentimental value tend to arise here. When conflicts do arise third parties can not only bring clarity, but also cool down the temperature in the room.
According to Martinez, what typically happens is immediate heirs, usually siblings, gather to discuss how inherited items should be broken up, but the process often falls apart. "Very smart people can be blinded by their emotions. They need someone to calm them."
There are a facilitators who can help, not just financial advisors and family dynamics experts like Martinez, but also professional mediators who can help the family come to an agreement.
"People fight over old bibles, paintings and nik naks. These items may not hold a lot of monetary value, but to the heirs these items are the last link to a loved one. … In some cases, a child believes that an item left for them is a link to the perception the parents held of them," Martinez said.
Again, it's important to have an open dialogue when it comes to dividing up the household, and there are multiple ways to avoid conflict.
Heirs could create wish lists of items they would like that can then be reviewed by the executor of the estate. It is the executor's responsibility to try to make sure everything the decedent owned ends up where it's supposed to.
Some people group items into buckets of equal value, while Martinez says she has witnessed others decide who gets what by rolling dice. Whatever method is chosen, open communication is essential to avoiding conflict.
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