When an Estate Plan Becomes an Estate Problem: 7 Warning Signs Families Shouldn’t Ignore
Most estates and trusts are administered without any fighting in court.
I want to start with that because families sometimes assume that every disagreement after a death means they need to “lawyer up” and head to court to litigate or contest the estate plan. That is not the case.
Administering an estate or trust will take time. Assets have to be identified and valued. Creditors need to be notified and debts need to be settled. Tax returns may need to be filed. There may be property that needs to be sold in the state of Colorado or elsewhere. Trustees and personal representatives will probably need information from banks, financial advisors and other institutions before they can make distributions.
During that time, families don’t always agree.
That doesn’t mean something has gone wrong.
But sometimes there are signs that a situation has moved beyond the ordinary frustrations of settling someone’s affairs. Here are seven that you should consider.
1. No One Will Tell You What Is Going On
There is a difference between an estate taking time and the person in charge refusing to keep people informed.
Trustees and personal representatives have legal responsibilities to the people are impacted by the estate or trust assets. Those people may be creditors or beneficiaries. In Colorado, they also have a very limited obligation to give notice to people who would inherit if there was no will even if they will or trust has excluded them.
That does not mean a beneficiary is entitled to updates or gets to participate in every decision.
But months of unanswered questions, refusal to provide documents, or vague statements like “everything is being handled” can be a warning sign.
Sometimes the solution is simply a clear written request for information. Sometimes a more forceful demand may be needed.
2. Money or Property Seems to Be Disappearing
A parent dies and suddenly Mom’s jewelry cannot be found.
A sibling has been using Dad’s debit card.
Money is moving out of an account and no one will explain where it went.
The family home is being occupied rent-free while the estate pays the mortgage, taxes and insurance.
Not every unusual transaction is wrongdoing. There may be a perfectly reasonable explanation.
But unexplained transfers, missing property or personal use of estate or trust assets deserve attention.
A trustee or personal representative is a fiduciary in a position of trust. That means the person managing the property is not simply dealing with his or her own money. A Colorado personal representative has a duty to settle and distribute the estate in accordance with the law and to act in the best interests of the estate’s successors.
Being named “in charge” does not mean being named the owner who can do whatever they want.
3. One Beneficiary Is Being Treated Very Differently From the Others Without a Clear Reason
Different treatment is not automatically improper.
A trust may intentionally give the trustee discretion. One beneficiary may have different needs. A parent may deliberately have left children unequal shares. There may be tax or administrative reasons for handling particular assets differently.
The question is whether the difference comes from the estate plan and proper administration or because the person in charge is making up the rules as they go along.
One sentence we hear surprisingly often is:
“Dad wanted me to decide what was fair.”
Maybe he did. But you still need to follow what the documents actually say.
The job is to administer the plan as it is written, not what one thinks the plan should have been.
4. Someone Is Suddenly Producing a New Will, Trust or Beneficiary Designation
A late-life change to an estate plan is not inherently suspicious.
People remain free to change their estate plans as long as they have the legal capacity to do so and are acting of their own free will.
But some circumstances will raise concerns.
Karen once had to testify in a Colorado court case where her client had written and rewritten her will several times over the years. Each version of the will divided the estate equally among the children. Then the client’s ne’er do well son got his elderly mother to leave everything to that son. The court found that the mother’s last will was invalid because the son had unfairly influenced his mother during a time of diminished capacity.
But we have also done a large number of estate plans where the parent clearly and intentionally wants to leave nearly everything to the child who became the primary caregiver or source of assistance. So, the distinction comes down to some important considerations.
Was the parent making independent decisions? Did the parent understand the change? Who arranged the attorney appointment? Who participated in meetings? Did the parent receive independent advice? Was someone exerting pressure?
The goal is not to turn every unexpected estate plan into a lawsuit. It is to determine whether there is a legitimate reason to investigate further.
5. The Person in Charge Has a Serious Conflict of Interest
It is very common for a trustee or personal representative to also benefit from the trust or estate.
That alone is not a sign there is a problem.
But wearing two hats requires discipline and attention.
Imagine three siblings inherit a house and one of them is the personal representative. That sibling wants to buy the house from the estate.
That may be possible. It may even be a good solution for everyone.
But now the personal representative is negotiating both for the estate and for herself.
Similar problems arise when a trustee wants to make a loan to himself, purchase trust property, pay himself unusually large compensation, or make decisions that benefit his interests at the expense of other beneficiaries.
Conflicts do not necessarily mean someone has done something wrong. They do mean the situation should be handled carefully and transparently.
6. The Estate or Trust Seems to Be Going Nowhere
This is the sister problem to problem #1. While probate and trust administration does not happen overnight it should also not sit indefinitely with no apparent progress.
A delay may be entirely justified. There may be creditor periods that require waiting. Things may slow down because of litigation, a difficult tax issue, real estate that is hard to sell, a business that needs to be valued, or a creditor dispute that has to be resolved.
What concerns us is unexplained inactivity.
If a year passes and no one can explain what has been accomplished, what remains to be done and why distributions cannot be made, beneficiaries are entitled to start asking harder questions.
The useful question is not simply:
“Why is this taking so long?”
It is:
“What specifically remains to be done before the estate or trust can be completed?”
A diligent and competent person in charge should usually be able to answer that question.
7. Family Conflict Is Starting to Drive the Administration
We encounter cases where the legal documents are flawless, but the family dynamics are fraught with landmines.
One sibling believes Mom always favored another. Someone thinks the family business should stay in the family. Someone else wants it sold immediately. A beneficiary thinks the trustee is controlling. The trustee thinks the beneficiary is impossible.
Those emotions are real, but they can become very expensive when they start driving legal decisions.
This is also where early legal advice can make a tremendous difference.
Estate litigation does not always mean going to trial. Sometimes the best outcome is helping everyone understand the documents, identifying the actual legal issues, separating those issues from old family grievances, and finding a solution before positions become entrenched.
So When Should You Call an Attorney?
Earlier than many people think.
Calling an attorney does not commit anyone to filing a lawsuit.
Sometimes we review the documents and explain that what is happening is entirely appropriate. Sometimes we recommend asking the fiduciary for particular information. Sometimes a meeting among the people involved resolves the problem.
And sometimes there really is an issue that requires court involvement.
The advantage of getting advice earlier is that you can make that decision based on facts instead of suspicion, anger or frustration.
There is also another side to this.
If you are the trustee or personal representative, getting advice early can help protect you. Many fiduciaries are family members who are trying very hard to do the right thing but do not know exactly what the law requires. Good administration, good records and good communication prevent a surprising number of disputes.
A Good Estate Plan Should Reduce Problems, Not Create Them
No estate plan can guarantee that a family will never disagree.
What good planning can do is make responsibilities clearer, choose fiduciaries carefully, anticipate likely areas of conflict, and give the people left behind a workable roadmap.
And when something does start to go wrong, recognizing the problem early usually gives everyone more options for resolving it.
If you live in Colorado or have property there and are looking for help to plan your estate and minimize family disagreement, we can help. If you are managing or benefiting from a Colorado estate or trust and have questions about how the estate is or should be administered, we can help with that too.
