How to avoid succession disputes

Article published in Direktor Magazine, No. 37, January 2019

Where to start?

In his article Will heritage be richness or curse, published in the October issue of Direktor Magazine, mag. Samo Lubej advised to talk about succession openly.

Simple advice, yet talking about succession is often difficult and in many families, succession and division of property during lifetime or in case of death remain a taboo.

Transience

These talks are unpleasant by their very nature, as succession is a result of transience. Although it is inevitable for everyone, it is not pleasant to think about transience, let alone discuss it with persons with whom we have deep emotional ties.

Since this fundamentally includes talks and reflections that imply negative feelings of all the persons involved, it often occurs that we do not even want to think about succession and even less of inheritance, let alone talk about it. This is all the more true when fear exists that succession will lead to conflict situations in the family.

In the first part of this article, I will describe some experience from practice, when inheritance became a curse in particular as regards relations between the heirs, as it is wise to learn from others’ experience. In the following part, I will present how with the right approach and mainly with proper communication it is possible to avoid many disputes and legal proceedings, which are expensive and exhausting for everyone, and above all destructive to family relations.

Long – lasting inheritance proceedings

How complex and long-lasting inheritance proceedings may be follows from the following real example from practice: in order to divide his property between his three children and his wife, the deceased made a will in good faith. He even laid down that each of the children is entitled to a young bull or its counter value, so that none of them would be deprived. It seemed that the deceased acted diligently and that his descendants will be able to split the heritage without any trouble.

The deceased died in the 1990s. The descendants roasted the first bull together, before the inheritance proceeding has even started. In the inheritance proceeding, everything became disputed between the heirs; the value of estate, the value of gifts and the value of the young bull were evaluated by appraisers and experts, the first decree of distribution was issued only 8 years after the deceased had died and the inheritance proceeding was finally finished only 20 years later. By that time, there were no bulls left on the farm, and even if they were, the heirs would definitely no longer be roasting them together.

In this context, it shall also be explained that in the described inheritance proceeding there were no such disputed issues due to which the probate court would refer any of the heirs to litigation. If the proceeding were interrupted and civil court decided in the meantime, it would not be known by today how the estate will be divided among the heirs.

In the case described, some of the heirs felt deprived due to the will and the gifts given during lifetime. The decision-making on the matter was entrusted to the court. To my knowledge, everyone was disappointed with the court’s decision in the end.

Discontent due to misunderstanding the will

Even if the heirs do not get involved in long-lasting court proceedings to assert their right, will and inheritance can still have a negative impact on their mutual relations. In my experience, many respect the last will of the deceased, but nevertheless feel deprived. They usually get such feelings when they do not understand the reasons why the deceased decided to divide the estate in such manner or do not agree with the explanations written by the deceased in the will.

It happens to often that the testators write and save their will, so that the heirs become familiar with its content only after their death. Maybe they do this in order to avoid conflicts during their lifetime. Consequently, it may happen that the heirs will not understand the will or that the division will not correspond to their interests. They will direct their anger at the deceased towards other heirs and the relations between them will be aggravated.

“Collaboration brings frustration”

Even if deceased persons do not wish to cause any disagreement between the heirs with the will and decide that they shall inherit as provided by law (intestate succession), disputes that have a negative impact on family relations still occur in practice.

The main characteristic of intestate succession is that the estate is divided by hereditary shares. This means that each of the heirs gets a proportionate part on all things belonging to the estate: all heirs become the co-owners of real properties, and also the co-owners of stocks, shares in companies and other property. The heirs then have to agree on how they will manage jointly this property or how they will divide the estate with a succession agreement. If a dispute arises between the heirs following the death of the deceased, the estate is usually not managed optimally, which causes its value to fall.

The heirs may also request a judicial division, which is again time consuming. The division is also carried out under the law, without considering individual’s interests.

Inheritance of shares in companies

In this regard, I would like to point to the inheritance of shares in companies. It applies to the shares in companies, as well as to the remaining property of the deceased, that they pass onto the heirs at the moment when the deceased dies.

Nevertheless, if there is a dispute as to who the heir is or what share an heir shall inherit, then it may happen that the company will lose an active shareholder for the time of resolving conflicts between the heirs. If we imagine a situation where the deceased was also the director of the company, such state freezes completely and disables the company operation.

Talk – way to understanding wishes

It follows from everything said above that the finding of mag. Samo Lubej is very much true, namely that the worst mistake made by the leaders of family is that they simply do not talk about succession with other family members.

In my opinion, in the talks on succession one often needs to pay more attention to the manner of communication than to the content of division. I would propose to establish first the interests of each individual and how the descendants imagine their life, and only then to find together a suitable manner of division.

Let us imagine a textbook example of a father who has one orange and wants to divide it between his two daughters. He would divide the orange fairly in two equal halves. Despite this, both of his daughters would be disappointed, as one wanted the flesh of the orange to make juice out of it, while the other one wanted the peel to bake a cake. Through talking and asking the right questions, the father could have identified their interests and could have divided the orange differently.

In order to achieve that the property continues to be managed successfully and to avoid a dispute between successors, we have to follow successors’ interests in the division and address their feelings appropriately.

Inclusion of a neutral person

When relations are too complex, when feelings are too strong and we are unable to identify interests by ourselves, it makes sense to include a third, neutral person in the discussion, who leads the procedure in a structured manner and has a positive impact on the issue of dividing the succession and on finding an agreement that will suit everyone.

In the families where preserving the relations is much more important than dividing the property according to the rules of law, it is appropriate, in my opinion, to include a mediator in the talks. Mediations are offered by different mediation centres, including the Mediation Centre at the Bar Association of Slovenia, and also the so-called family office, which has additional knowledge in the field of property management.