You’ve worked hard to accrue assets and build a legacy to leave to your loved ones after your passing. The last thing you want is for your estate to become the subject of legal disputes or undue tax burdens. Fortunately, with the help of an estate planning professional, you can strategically map a future for themselves and their loved ones that protects wealth and reduces the risk of litigation.
Why Estate Litigation Happens
There are several reasons why disputes about an estate may occur. The most common include:
Family Conflicts – Disagreements among heirs, particularly in blended families, can escalate into lawsuits.
Absence of Will or Trust – When the deceased dies intestate, state laws dictate asset distribution, increasing the likelihood of disputes.
Outdated or Vague Instructions – Conflicting or unclear language in estate plan documents can create confusion and lead to legal challenges.
Creditor Claims – If an estate has outstanding debts, creditors may attempt to recover funds, which can impact beneficiaries.
Lawsuits – Pending legal action before death may lead to an extended estate dispute.
Incapacity Accusations – If someone suspects a loved one was pressured into signing estate documents or lacked the mental capacity to do so, they may challenge the plan in court.
Trust Strategies to Reduce Estate Litigation Risks
Trusts offer a powerful solution to mitigate the risk of litigation and protect your legacy. A trust provides more substantial protection than a will alone. An estate planning attorney can provide more details on which of the following trusts is best for you:
Revocable or Living Trust – A living trust can help you avoid probate and keep your bequests private, as they are not matters of public record, unlike the probate process. A living trust lets you manage assets during your lifetime and transfer them directly to beneficiaries. You can also update a properly drafted living trust, preventing outdated provisions that might trigger disputes.
Irrevocable Trust – This type of trust removes assets from your ownership, shielding your estate from creditors. Irrevocable trusts offer protection from lawsuits, creditors, and even estate taxes because the assets they contain no longer qualify as personal property. However, modifying an irrevocable trust requires consent from your beneficiaries or the court, depending on the circumstances.
Spendthrift Trusts – If you worry about how a beneficiary might handle their inheritance, consider establishing a spendthrift trust. This type of trust restricts a beneficiary’s access to funds and prevents creditors from seizing trust assets. Funds within the trust remain under the control of a trustee, who distributes them according to the terms of the trust.
Special Needs Trusts – A special needs trust can help when a direct inheritance could disqualify a disabled beneficiary from government assistance programs like Supplemental Security Income (SSI) or Medi-Cal. Placing assets in a special needs trust ensures funds are used for their care without tripping asset limits.
Irrevocable Life Insurance Trusts – In an ILIT, the trustee uses trust assets to purchase a life insurance policy in your name and then pay the premiums to keep it active. When you pass away, the insurance policy vests, with the proceeds going to the trust. This type of trust is especially useful for wealthy individuals looking to help heirs pay estate taxes after their passing.
Work with an Experienced Palm Springs Estate Planning Attorney
Are you interested in protecting your estate from litigation? The best way to do so is by working with a knowledgeable estate planning attorney who understands the latest state and federal laws. Heritage Legal, PC, creates customized trust strategies for Palm Springs residents, with the goal of safeguarding their assets, avoiding unnecessary disputes, and protecting their legacies. Let us put in the work now to help you avoid unnecessary disputes later. Contact Heritage Legal, PC, today for a confidential, no-obligation consultation to explore the best options for your estate.