Taxation & Estate Planning

Pre-Mortem Planning and Family Settlement Agreements

By Joel A. Schoenmeyer

Earlier this week the Wall Street Journal printed this article about "pre-mortem rulings." The idea is that some states allow you to get your Will "pre-approved" -- a Judge says you were competent to make a Will, and that your Will is valid. Potential beneficiaries are notified of the hearing, and if they fail to object within the given timeframe, then they are barred from contesting your Will after you die.

It's an interesting idea, and it looks like more states are allowing it. But there are some downsides. For one thing, as the article mentions, you need to go through the ruling process each time you execute a new Will. Another problem is lack of privacy, as your Will (and, potentially, your dirty laundry) becomes public information.

To me, a pre-mortem ruling might be of use, but only in limited situations, and only after we've tried and failed to execute a family settlement agreement. This type of agreement can be used in various situations, but one of them would be where an individual is concerned that his or her Will is going to be contested after death. Basically, you get the relevant parties to agree that the Will is valid; in exchange (because there must be consideration), you set forth what you will give each party.

I think another advantage of a family settlement agreement is cost. A family settlement agreement will probably cost significantly less than going the court route, even if there is some attorney time spent in drafting and negotiating its terms. If the family simply cannot agree on a settlement, then you can try pre-mortem planning through the court.

Full post as published by Death and Taxes Blog on March 24, 2011 (boomark / email).