Avoiding Family Feuds

SUCCESS IN THE SOLID WASTE business left Ted Reinemann (not his real name) with lots of money. Less success in his personal life left lots of family members to fight over Ted's estate after he suffered a fatal heart attack.

Ted had two children in his first marriage, another two with his second wife, and a fifth child with his third wife. The galaxy of children and spouses set the stage for an altogether messy probate. During his lifetime, Ted deftly coaxed, coddled and cajoled the amalgam of mothers and offspring into a reasonably cordial relationship. All that changed after Ted died, and, under his will, the waste business was sold. Unfortunately, Ted did not leave behind explicit instructions on how the proceeds should be divided. Claims to the proceeds — several million dollars — let loose all of the tensions and bitterness that had, until then, been contained by the sheer force of Ted's personality.

Blended families account for some of the boom in trust and estate litigation, according to practitioners. No government agency or research organization keeps track of blended families. The divorce rate is, of course, a good place to start. The conventional wisdom puts the rate of marriage break-ups at 50 percent these days, but that can vary based on income, age, education and other factors.

Estates and inheritances must be carefully planned. The first rule, some experts say, is to keep non-blood relatives separated from each other. Stepchildren and stepparents are like oil and water. “Keeping them financially intertwined doesn't help anyone,” Boston-based estate-planning attorney Patricia Annino told The Wall Street Journal.

Successful estate planning involves explicit written directions on who gets what. If the heirs see a carefully worded statement — a will or even a prenuptial agreement — spelling out how the deceased wanted his or her assets distributed after death, it will go a long way toward avoiding a grubby and expensive will contest.

A Qualified Terminable Interest Property (QTIP) Trust holds cash and other assets that generate income for a surviving spouse. The assets pass to the children when the spouse dies. Assuming that the surviving spouse is a generation older than the children, the waiting period can be relatively short. However, if the children from a first marriage must wait for a stepmother to die, and she happens to be their age or younger, then the children may see no assets for a considerable period of time, if ever. One solution: life insurance provides an immediate payout on death.

Problems can arise when the owner of a waste firm or other company leaves control of the family business to the family member who seemed most interested and capable of running the enterprise. If the decedent's wealth is, for the most part, the value of the business, then other family members will be upset. One solution is to leave stock in the company to family members on some fair and equitable basis, but to require the person who will operate the business to buy out the interests of other shareholders — particularly non-blood relatives who desire no link to the family business.

Whether or not a waste firm owner's family is extended, blended or upended, taking the time to craft a detailed estate plan will reduce the chances of tears and tension down the road.

Barry Shanoff Legal Editor; Rockville, Md.