Family Issues in Estate Planning

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Estate planning is important for individuals who wish to exert some control over how their property is distributed before and after death. Family issues are often ignored in the estate planning process and sibling rivalries can intensify if there is a lack of planning and little communication among family members about property transfer. Studies have shown that over 20% of intergenerational transfers add to sibling rivalries. In order to avoid negative outcomes of estate planning (family members not speaking to one another, lawsuits, or strained relationships), families need to consider the human factors.

Where To Begin the Discussion

The first rule in estate planning is that the owner has the right to decide what is done with the property. It is important to clarify the legal aspects of ownership. Once it is clear who owns what, communication can help transfer the property smoothly either before or after death. Problems develop when the owner does not accept the right of ownership, and with it the responsibility of property transfer. Many persons either die without a will, called intestate, or without having discussed the arrangements with the affected family members. In the case of joint ownership, all owners need to communicate their desires with each other.

Children sometimes forget who owns the property. Other times, individuals' strong wills can get in the way. For these reasons, some lawyers do not allow family members to be present at the legal discussion with the person planning their estate. However, if the lawyer determines that the owner knows what he or she wants enough to prevent undue influence by their children, they may even suggest they be present to help facilitate the discussion. This is especially true if this is the first estate planning document or will for an elderly parent.

It may also be unwise to have one attorney prepare all the estate planning documents for closely related family members, unless it is clear that each person is knowledgeable, articulate, strong-willed, and familiar with legal terminology. Other factors to be considered are the similarities between family members in: age, health, family situation, assets, and goals. The more similar, the more likely members can be successfully represented by the same lawyer. The more dissimilar, the more likely they will need independent representation. A jointly held business, which is not a partnership or a corporation, needs special consideration.

If it is a husband-wife family, the lawyer's ability to represent both parties will be influenced by the following factors:

• The relationship of the lawyer to one family member, but not the other.
• The relative size of each estate.
• The existence of children from prior marriages.
• The stability of the marriage.

In both the husband-wife and the parent-child family, the greatest opportunity for conflict is in the preparation of a multi-generational estate plan.

The questions that most often arise are related to the need for income in the future, whether the asset itself is a problem for the marital deduction, or whether the asset should be kept together with the rest of a business. Your goals and expectations, as well as the legal and economic ramifications, influence how you transfer property. Patterns of inheritance or land transfer may be influenced by ethnic background and tradition. Studies on Midwestern families have indicated the following patterns:

• Farmers of German heritage seem to transfer property early and equally among their offspring.
  
  
• Families of English backgrounds have a tendency to equally distribute property among offspring, but delay its transfer until the death of the parents.
  
  
• Families of Irish heritage are inclined to transfer the farm to only a single child, also waiting until after the death of the parents.

Socialization of the child to run the family business tends to be another traditional transfer pattern. This tradition depends on the age and readiness for retirement of the elder generation and the age and experience of the potential successor. What is your ethnic background and does your family have a tradition of transferring ownership to the next generation? Is it appropriate to skip a generation if the owner desires?

The transfer of real estate property can be traced throughout history. However, it can be more difficult to trace patterns in the transfer of personal property. Items such as jewelry, furniture, dishes, guns, or hobby equipment are often distributed by the "unwritten rules" of the family. It is important to take inventory of meaningful possessions, who you want them given to (both inside and outside the family), and for what reasons. Then, make known legally what you want to do. Remember the owner holds all distribution rights. And finally, communicate in some manner to the family what you have chosen and why. You may want to transfer some of your property to someone who has helped you in a manner that family members may not be aware.

Unwritten rules often deal with the unequal distributions in families. Ask yourself:

• Are sons and daughters treated the same?
  
  
• Does the position in the family make a difference (oldest vs. another position)?
  
  
• Are all children treated the same, regardless of health and/or ability; or status in being adopted, natural-born, or a step-child?
  
  
• Does it matter if the child is married or single? Or has children of their own or not?
  
  
• Does geographic location of your descendants make a difference?

What are your rules and your family's rules?

The important steps in estate planning are making decisions, taking action, and communicating how you want your property transferred. If these steps are avoided, the unwritten rules of the family may take over and increase the likelihood that arguments, rivalry, and family problems will occur.

Other publications available on estate planning in your local county extension office are: Estate Planning: The Basics (FO-2799) and Estate Planning: Records (F0-2800).

References

Magnuson-Martinson, S. and J.W. Bauer. 1986. "Family farm and estate planning: some important considerations." The Rural Sociologist. 6(3):151-159.

Salamon, S. 1980. "Ethnic differences in farm family land transfers." Rural Sociology 45:109-119.

Titus, S.L., P.C. Rosenblatt, and R.M. Anderson. 1979. "Family conflict over inheritance of property." Family Coordinator 28:125-137.

Wade, J.R. 1987. "When can a lawyer represent both husband and wife in estate planning?" Probate and Property 1(2):12-15.

Jean W. Bauer
Family Resource Management Specialist
Department of Family Social Science
University of Minnesota.

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