Executive summary
- High-value probate litigation involves the estates of high-net-worth individuals who have a large number of high-value assets and complex asset portfolios.
- Estates of high-net-worth individuals may face several challenges in probate, like an increased risk of disputes, a higher risk of legal challenges, financial challenges for the high-value estate, and having to manage assets in multiple jurisdictions.
- Some strategies that interested parties in an estate of high-net-worth individuals can take to protect their interests include engaging legal counsel early, understanding their rights, and maintaining clear documentation of estate assets.
- An experienced probate and estate litigation attorney with experience in high-value estate probate disputes can offer support and guidance in understanding the probate process, accounting for all assets, and navigating disputes.
Introduction
Achieving a high net worth and reaching a high economic status is an impressive lifetime milestone. However, it’s important that anyone who reaches that level of wealth is able to protect that wealth for their children and descendants for years beyond their lifetime. Probate is the process for settling an estate and distributing its assets to the appropriate beneficiaries or heirs.
High-value estates are unique in that they have complex asset portfolios and high stakes that lead to a more detailed probate process and a greater risk of disputes. The involvement of high-value assets and a large number of beneficiaries or disinherited family members often makes probate litigation more likely as the increased number of parties angle for a portion of the inheritance. That risk becomes even greater if the beneficiaries are desperate or opportunistic. The greatest risk of all, however, arises when disinherited family members attempt to claim part of the estate.
If you are concerned about the risk of facing disputes or litigation throughout the probate process, you should take proactive steps to protect your assets and the estate as a whole. Taking steps like engaging legal counsel, establishing open communication between all interested parties, and utilizing dispute resolution strategies can all go a long way.
Understanding probate litigation for high-net-worth individuals
High-value estates are those left behind by high-net-worth or ultra-high-net-worth individuals with a complex asset portfolio and incredibly valuable assets. Typically, high-value estates are those that have a minimum of $50 million in assets or exceed nine figures. The probate process is used to settle estates and transfer ownership of assets from the deceased to their rightful heirs.
Common assets in high-value estates may include real estate properties, businesses, mineral interests, artwork, collectibles, stocks, bonds, or other investments. These assets may be included in a will, trust, or estate planning documents to identify beneficiaries who will receive them. In cases where there is no will or estate plan, they will need to be passed on to legal heirs according to state intestacy laws, or laws that outline the heirs of an estate based on their relationship to the deceased.
Estates of high-net-worth and ultra-high-net-worth individuals often face litigation due to the high stakes of the estate and the many interested parties looking to receive a stake in the inheritance. Litigation can come into play for a variety of reasons, including disputes around which beneficiaries should receive which assets, how much of a share each beneficiary should receive, and whether the estate plan is valid and reliable.
Common challenges of probate in high-value estates
The estates of high-net-worth and ultra-high-net-worth individuals may face several challenges because of the nature of more complex estates with a greater number of assets and more beneficiaries involved.
Complexities of probate
Probate can be complex on its own with the need to inventory assets and assess their values, but high-value estates can be even more complex with a large number of complex assets that may include both liquid assets and physical property. It will be up to the estate executor to sort through these assets, maintain fair accurate valuations, and determine how to distribute these assets according to a will or state intestacy laws.
Adding even more complexity is that high-value estates of high-net-worth individuals often have assets located in various locations, both across state lines and even internationally including vacation home properties, yachts, valuable jewelry and collectibles, and more. A version of the probate process may be necessary in not only the primary jurisdiction, but each jurisdiction where valuable assets are located. These secondary probate proceedings are often called ancillary proceedings.
Every state and jurisdiction has its own laws around probate, which often requires consulting skilled legal and financial professionals in each area where probate is necessary. These complexities underscore the importance of proactive estate management and having a will that accounts for all assets in any location.
Legal challenges of probate
Probate involves several legal considerations and potential challenges, ranging from legal challenges around the will to simply navigating the legal nuances of the process. One of the most common legal challenges in probate is challenges to the validity of a will. If any interested party who expects to receive an inheritance suspects that the will has been induced by undue influence or fraud, they may raise a legal will contest in court.
Questions surrounding a personal representative’s ability to uphold their fiduciary duty. Legal challenges may arise if an estate executor fails to communicate with beneficiaries or commits an act of misconduct, such as commingling estate funds or mismanaging estate assets. Litigation may either absolve the estate executor or result in their removal from their role.
Estates of high-net-worth individuals tend to be more susceptible to legal challenges because of the high stakes around valuable assets and the risks of clashing self interests getting in the way. Consulting legal experts and having a network of lawyers to offer guidance can make a crucial difference if legal issues arise.
Financial challenges of probate
Carrying out probate can have considerable financial challenges, especially for high-value estates with a large number of assets. Potential financial challenges may include everything from hiring experts to offer support in estate management to funding the maintenance of estate property.
Some of the common financial challenges that face estates of high-net-worth individuals include:
- Paying legal fees for various attorneys
- Paying for the support of expert appraisers
- Hiring local experts and attorneys in jurisdictions where assets are located outside of the deceased person’s home state
- Paying for estate and property taxes
- Paying required bills for the estate
- Spending money on managing and maintaining estate property
Estate taxes are some of the most significant expenses facing high-value estates. Although some states like California and Texas do not have an estate tax, the United States has a federal estate tax for any estates valued over $13.61 million. Separately, the executor may need to file income taxes for money earned from estate assets during estate administration. We recommend consulting with tax professionals for more guidance on how to navigate estate taxes and what to expect.
Disputes during probate
Legal challenges are not the only form of dispute that occur in probate. Beneficiary disputes may be grounded in personal disagreements rather than the violation of estate or fiduciary law.
Common disputes during probate include:
- Beneficiary disagreements regarding the inheritance they are entitled to
- Beneficiaries feeling they are entitled to a greater share of an inheritance
- Beneficiaries, like siblings, disagreeing about how to divide the family home or other inherited property
- Claims of fraud or undue influence that affected the validity of the will
- Assertion of spousal rights that claim property otherwise subject to an estate plan
However, concerned parties may avoid probate litigation through mediation and negotiations between those claiming an interest in the estate. Mediation offers a chance to find common ground and navigate inheritance disputes without having to file formal claims at the probate court. A skilled probate litigation attorney may be able to support in the mediation process to minimize the chances of having to pursue litigation that damages family relationships.
Identifying jurisdictional issues
Many high-net-worth individuals have assets in more than one location. Whether it’s a yacht out on the coast of a different state or a few vacation homes across the country, the interested parties in an estate must account for the unique laws in each jurisdiction to enable the distribution of assets. In many cases, the executor must file a primary probate in the jurisdiction where the decedent resided at death and then file a secondary probate, known as ancillary probate, in conjunction with the laws specific to the states where any other assets are located.
International probate may present even more difficult problems with estate management. For example, many ultra-high-net-worth individuals have a large swath of assets overseas, including real estate property, investment accounts, vehicles, and more. In these cases, an estate executor must build a team of legal and financial experts to appraise these assets and ensure that they follow the probate laws in the relevant jurisdiction prior to distribution.
Strategies to protect your interests
The estates of high-net-worth and ultra-high-net-worth individuals face several challenges compared to typical estates. The following strategies will put you in the best position to protect your interests and the estate as a whole.
Engage legal counsel early
A skilled probate and estate administration attorney is the starting point for successfully navigating the probate proceeding for a high-net-worth estate. If you anticipate a potential dispute between beneficiaries, heirs, or disinherited individuals, then you should seek an attorney skilled and experienced in the resolution of probate disputes. You should seek the support of legal counsel as soon as possible to not only help you navigate disputes if they arise but also understand what rights you have and what safeguards you can take to protect your interests.
Benefits of engaging probate dispute counsel include:
- They will have a detailed understanding of state and local laws
- They have experience in mediating and navigating disputes
- They will help you gather evidence for and establish your case for disputes
- They can support you in understanding the procedures of the probate process and risks associated with probate disputes
Seeking the support of a probate litigation attorney as soon as possible will ensure that you have the resources to understand and get through a dispute over inheritance or estate administration. Experienced probate dispute counsel can support you by building a strong case with the greatest likelihood of securing your rightful access to your inheritance.
Have an understanding of your interest in an estate
It’s important to do your due diligence to discover the property, investments, assets, and other interests that may be in an estate. Consider all the potential assets of the estate, including investments, stocks, bank accounts, real estate property, collectibles, and other belongings.
Take the following steps to understand the estate interests and identify all assets:
- Sit down with any interested parties in the estate, including relatives of the deceased, to gather information about possible assets or property
- Comb through the deceased’s financial documents to identify any financial or investment accounts
- Identify any jurisdictions where you may need legal counsel
- Search public databases for properties titled to the deceased
Once you have an idea of where all the estate assets are located, ensure that you have a legal team prepared with the resources necessary to navigate probate processes wherever they may be necessary. This may include local attorneys, appraisers, or tax advisors in each area where you may have interests. Our attorneys at RMO Lawyers have an extensive network of legal professionals around the world, which we make available to our clients whenever they need support.
Maintain clear documentation
Maintaining clear documentation throughout the probate process is a helpful step for minimizing the risk of potential disputes. Clear documentation will promote a more organized probate process and enable an easier experience with managing and settling an estate. Institutions like banks or property managers often require extensive documentation before they will work with an executor. Courts often require that estate representatives provide extensive documentation to prove they properly managed the estate.
Some of the valuable documentation to have on hand includes:
- Clear estate planning documents, like the will or a trust instrument
- The decedent’s death certificate
- Letters testamentary that specify the beginning of the probate process and the appointment of the executor
- Other documents issued by the probate court, including orders of appointment and orders approving certain actions by the executor
- Deeds or titles for any estate property
- Financial statements from any banking or investment accounts
- Asset valuations from appraisers or other parties
- Communications between family members
- Contact information for all heirs and interested parties
- Detailed accounting of all estate transactions
Open communication among beneficiaries
Communication and transparency between beneficiaries and any interested parties in an estate is a crucial element in minimizing the risk of disputes. Clear communication helps to avoid disputes by adjusting everyone’s expectations of what will likely happen during probate. Regular communication also helps minimize the risk of disputes by setting a standard for addressing concerns through communication rather than litigation.
Taking steps like holding regular meetings between beneficiaries or holding a mediation can provide more opportunities for transparency and group problem-solving. It’s also a good idea to establish clear and preferred communication channels for all interested parties, so that the executor may keep the interested parties updated on important developments. In fact, most states require that executors maintain a certain level of communication with beneficiaries.
Consider mediation or alternative dispute resolution
If disputes arise during probate proceedings, it’s important to recognize that several strategies can help manage those disputes without resorting to litigation. Litigation can be time-consuming, costly, and damaging to family relationships. Mediation and other methods of alternative dispute resolution may help avoid the costs associated with litigation, including extensive legal fees and filing fees.
Alternative dispute resolution methods like negotiations or mediation are often the least invasive approach to resolving legal or inheritance disputes. These approaches seek a resolution to disputes that satisfies all sides so the estate administration process can move forward.
For example, if two siblings inherit an equal share of the value of the family home, but one of the siblings wants to maintain ownership of the home, the two sides can negotiate an agreement where one sibling maintains ownership of the physical property and compensates the other with half the financial value of the home.
Understand your rights and obligations
If you are an interested party in an estate, you have important legal rights and responsibilities during probate. This is true for all beneficiaries and executors.
Beneficiaries typically have the right to information about actions taken in regard to the administration of the estate, including the appointment of the executor, transactions involving estate assets, and the timeline for distributing assets to beneficiaries. Many states require that the executor of an estate provide a regular accounting to beneficiaries to safeguard this right. Executors may wish to submit accountings to beneficiaries even if state law does not impose this requirement, because transparency can help avoid future disputes.
In addition, executors have a responsibility to manage the estate with the best interests of the estate and beneficiaries in mind. This responsibility means that they should responsibly protect and preserve estate assets, keep beneficiaries reasonably informed, and act in accordance with the estate planning documents and state law. If the executor fails to uphold these duties, beneficiaries usually have the right to raise a legal contest against the personal representative.
Proactive asset protection planning
Your estate planning strategies are essential for protecting your assets and minimizing disputes. Thoughtful individuals can take advantage of these strategies to avoid disputes before the need for probate. Probate is usually simpler and sometimes unnecessary if the deceased individual took care and effort to build an estate plan and proactively transfer ownership of assets to beneficiaries prior to death.
Strategies that high-net-worth individuals can take include:
- Creating a formidable estate plan with a clear and detailed last will and testament
- Establishing and funding a trust that transfers ownership of assets to beneficiaries
- Designating payable-on-death (POD) beneficiaries for bank accounts and life insurance policies
- Establishing joint ownership with the right of survivorship with a beneficiary for accounts or property
- Executing and filing transfer-on-death (TOD) deeds to allow for the seamless transfer of real property, depending on the laws of your state
Take control of your estate with RMO Lawyers
Probate for high-value estates offers unique challenges, including a complex asset portfolio, a higher risk of beneficiary disputes, and the potential for having to navigate the probate process across multiple jurisdictions. Taking proactive steps to prepare yourself for probate is important for safeguarding your interests and ensuring a smooth process. Being proactive starts with securing legal representation to offer guidance.
Our probate litigation attorneys at RMO Lawyers will support you in navigating issues during probate. Our team has decades of experience in the probate process and have worked in countless cases involving high-value estates. Whether you are dealing with a specific dispute during probate or simply have concerns about how to navigate the administration of an estate, our attorneys can provide a helping hand.
Schedule a consultation with our team at RMO Lawyers for support in taking steps to protect your estate.
Glossary
Probate – The court process in which the assets of an estate are gathered, accounted for, and distributed to the heirs or beneficiaries after an individual passes away, either in accordance with the deceased’s wishes if they had a will or following local intestacy laws if there was no will.
Beneficiary – An individual or entity entitled to estate money, property, or other benefits according to the terms of a will.
Heir – A person who is entitled to receive benefits from an estate in the absence of a will according to state laws.
Decedent – A person who has died and left behind assets to be distributed.
Estate executor – An individual appointed by a probate court who is responsible for managing and administering an estate and is named as executor in the deceased’s will.
Personal representative – A catch-all term that includes both executors and estate representatives appointed by a court in the absence of a will.
Intestacy laws – State laws that identify the persons entitled to receive a deceased person’s property in the absence of a will and establish the portion of the deceased person’s estate that those persons are entitled to.