Family disputes often arise in the estate administration process. Especially if there is money at stake, a disgruntled family member or other interested person may be unhappy with his or her inheritance, or lack thereof. A personal representative of an estate or trust may be forced to deal with a challenge brought by one of them.
When the estate itself is illiquid, difficulties arise that when challenged often mean less is available for distribution when the dispute is ultimately resolved because of the simple fact that the asset cannot be divided but instead must be sold to be distributed. The sale and challenge are an additional cost that gets paid by the estate before an asset can be distributed. When an estate plan (a will or a trust) is challenged, the three most common reasons are listed below.
A challenge to the validity of the estate planning documents is often initiated by a disinherited family member or someone who believes, rightly or wrongly, that they are receiving less than what was gifted. A challenge to the administration of the estate or trust is really a complaint against how the personal representative is handling the administration of the estate. Usually in these scenarios, an interested party alleges that the personal representative is not doing his or her job, is using the estate or trust assets for the personal representative’s own benefit, or is acting against the beneficiaries’ best interests. The third scenario is a challenge to both the validity and the administration of the estate or trust.
The procedure to challenge the validity or the administration of the estate or trust is the same. The challenger files a petition with the probate court with jurisdiction to resolve the dispute, usually the county where the deceased person died. The personal representative files a response, usually denying the allegations. A hearing, if the parties cannot come to a resolution on their own, will be required to resolve the dispute. The surrogate judge will make the decision on how the challenged item will be distributed to beneficiaries. Like in any litigation, there are court fees, valuation fees, attorneys’ fees, and discovery fees, including depositions, that are assessed throughout the dispute. These fees are paid by the challenger in many cases if they lose, but ultimately come out of the estate if there was no wrong doing attributed to the personal representative. This means that the challenger may receive less after dispute resolution.
Resolving estate administration disputes early by quickly obtaining legal advice about the rights and obligations of the challenger and the personal representative before the costs get high should be the focus of all parties in finding a solution or common ground in a dispute.