Q&A: Estate Settlement Gone Awry?

Make sure your estate plan is the right one for your family.

Question: My family is dealing with an estate settlement. Because of poor planning, it appears we’ll wind up with less than $10,000 to split several ways. One of the heirs, however, wants all the money and says he’ll fight to get it. If that happens, the estate could become insolvent because of legal costs. Can this person file against the estate even if there’s no money left?

Ric: Anyone can sue anyone over anything, but doing so in this case appears to be pointless. People usually sue in order to win money (although other reasons include protecting or restoring a reputation, a business strategy, to display anger or a desire for revenge).

Regardless of the motivation, many people end their legal pursuit once they discover how expensive and time-consuming it is. This is especially true when their motivation is to win money and they realize there’s little or no money to win.

You should say something to him to this effect: “Look, the total estate is $10,000, and you’re going to get $2,000 of it. If you try to get the other $8,000, you’ll need a lawyer. Good luck with that.” When the person sees how much the legal fees will be and how much time his case could take — meaning years — he’ll think better of it.

Meanwhile, read the will that made you the executor. The documents should say that you cannot be held personally liable for anything that happens (unless you commit fraud or violate IRS rules). If there is no “hold harmless” clause in the will to protect you, resign immediately.

The takeaway lesson here, of course, is proper estate planning. You said there hadn’t been any; perhaps your relative died without a will (called intestate) and the court appointed you executor. We sometimes encounter situations like this, and it’s always sad when we find that money left by a deceased person causes family fights, creating stress for the executor and heirs alike.

Estate planning is not a do-it-yourself project, even though there is software on the Internet you can download to prepare wills and other documents. It’s far better to leave these complex matters to experts. Working with a financial advisor and an estate planning attorney can help your family avoid these issues.

This material was prepared for informational and/or educational purposes only. Neither Financial Engines Advisors L.L.C (also referred to as Edelman Financial Engines) nor its affiliates offer tax or legal advice. Be sure to consult with a qualified tax or legal professional regarding the best options for your particular circumstances.

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