How to Avoid Lawsuits?

Lawsuits can be filed by anyone and there’s no sure way to avoid them. It is impossible to anticipate every issue that could give rise to the lawsuit. However, there are several ways to reduce the likelihood of litigation.

Beneficiaries should be a part of the planning experience. It’s important that clients be open with their estate plans with their family. Numerous lawsuits arise because people conceal important information such as having a child out of wedlock or having family members who are addicted to drugs or alcohol.

It’s important to have an open discussion with the beneficiaries and the parents in the estate planning process. The goal is to avoid conflict by letting the beneficiaries know what to expect in the executor and trustee and what share of the assets each beneficiary can expect to receive. Although these discussions are uncomfortable, they’re a big help to avoid a lawsuit down the road.

The United States has 95% of the world’s lawsuits but only 5% of the world’s population. Of all the different states, California is the most litigious. Nationally, last year, over 20 million lawsuits were filed.

It’s important to have a “no contest clause” in both your will and trust. We advise our clients to include a substantial gift to family members who may have reason

to challenge a plan. With this gift the beneficiaries have a choice between receiving the gift or going into litigation.

Your estate plan should be reviewed every three years to make sure that your power of attorney is current and your schedule one, attached to your trust, is updated. Laws occasionally change and many firms don’t send out updates to their clients with these changes. Death, marriages, birth, divorces, and other important events should be followed up with an updated estate plan.

Remember, trust assets are controlled by the trustee. Will assets are controlled by the executor. IRA assets are controlled by the Beneficiary Designation Form.

Should there be more than one trustee, some clients want a family member to serve as a co-trustee with a corporate fiduciary to make sure everything is properly handled. After all, corporate fiduciaries have years of experience.

Individual family members may not understand the duties and liabilities of acting as trustee. Some clients prefer to have all the children jointly serve as co – trustees, which often spells disasters because all children must agree as to the selection of their trust attorney, the realtor, and who the CPA will be.

Although there is no right or wrong answer in terms of your selection of trustee, you should be aware that multiple trustees have to reach a unanimous agreement and if they can’t agree, then you’re going to court and the judge will make the decision.

Going to court is expensive in both time and money and should be avoided in every circumstance, if possible.

Rather than going to litigation with your estate plan, mediation and arbitration should be considered as an alternative because they are both cheaper and faster than going to court.

In mediation, a neutral party, usually a retired probate judge or an experienced trust attorney, will hold a confidential settlement meeting where everything is off the record and cannot be used in future litigation. This allows the opposing parties to have an open discussion about settlement options. If the meeting is successful, all parties will sign a binding agreement at the end of the session.

An arbitrator takes on the role of a judge making the final ruling in a private process that involves less discovery than public probates.

Newer estate plans often mandate the use of mediation or arbitration if there is a dispute after the trustor’s death.

Although there are no guarantees that careful estate planning will prevent litigation, there are a number of ways to minimize the risk of litigation by resolving the disagreements outside of court.

Your best bet to avoiding litigation is hiring a certified estate planning lawyer who has years of experience and has created numerous trusts.

Call the Trust Dr, W. Bailey Smith, who has created over 7,000 trusts and handled over 1,000 trust administrations at (949) 833-8891. Email him at BSmith@YourTrustDr.com.