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Cases on Estate Planning:    "Where there is a Will, there is a way..."
Case 1: A misguided belief: “It won’t happen to us”

Bill and Jane had just left their two children with the baby sitter and were looking forward to celebrating their 7th anniversary that evening. Little did they know that their lives would be soon be snuffed out by a drunk driver. As most young married couples are inclined to do, they never gave much thought to making a will.

What happens to the kids?

A specialized court called a probate court will be called upon appoint a guardian and conservator for the children. If Mom and Dad had made wills, they could have specified their preference for whom they considered to be most suitable and qualified to care for their minor children. Now, the court will have to make that decision without the input of those who knew best.

What happens to their property? 

The laws of the state where they resided will determine who gets what and how much. The administration and disposition of their assets will be determined by a probate proceeding – possibly one for each parent if it isn’t clear who died first - simply because that’s what the law requires when people die intestate (without a will) and own assets in their name alone.  

BUT WAIT! THEY’RE YOUNG CHILDREN AND CAN’T HANDLE MONEY! True enough. That’s another reason why a conservator or guardian of their property must be appointed by the probate court to handle their assets. The conservator will expend the money for the care and support of the children and will have to account periodically to the court. But is the court appointed guardian and conservator capable of managing money and making wise decisions on behalf of the children? Perhaps or perhaps not; time will tell, but, as parents of a minor child or children, do you want to take that risk?

Let’s assume the conservator and guardian do a commendable job of rearing the children, and by the time the kids reach legal adulthood – age 18 – there is plenty of money left. Well, the law provides that when they reach that special age, they ARE ADULTS, regardless of whether they behave like adults or not. The conservatorship terminates, and the children will get the money outright in a lump sum. One child is bright and motivated and goes to college; the other is a major slacker, and his money goes up in smoke.

So what could Mom and Dad have done? 

Mom and Dad could have made wills that named a guardian and conservator for their children, which would include specific preferences for the support and upbringing of their children, including education; and (2) established a trust for the benefit of each child to pay for education and other matters (for example, if a child encountered health problems or other forms of disability) of importance to both the parents and the children, which could continue beyond the age of 18 to a really magical age when each child would, in fact, behave like a responsible adult. 

Case 2: “But they agreed...” 

Bob and Mary were married, each for the second time. Both had adult children from their previous marriages. They verbally agreed that when the first died, all assets would go to the surviving spouse, and when the survivor died, all the kids would share the remaining assets equally. Then Mary died, and Bob got everything. So far, so good.

BUT THEN the children became estranged, through miscommunication, insult, neglect, influence of Bob’s children, whatever . . . there are hundreds of excuses and justifications. In any event, Bob chose to ignore the agreement he made with Mary, his kids got what was left, and the Mary’s kids got NOTHING, unless you call the right to bring a lawsuit against Bob’s estate an asset you’d be happy to receive!

What could Bob and Mary have done? 

Bob and Mary could have (1) had a written, not verbal, agreement about how the assets were to pass; (2) provided a trust arrangement for the survivor with an independent trustee to manage the assets of the trust of the first spouse to die, with clear and explicit instructions about the permissible uses of the trust funds. Yes, the independent trustee would cost money, but in the long run the couple’s intentions would have been carried out and their children would not have been at war. Creating a trust would have been a real bargain.

Case 3: The case of the warring siblings

Tom and Sally had wills leaving all of their property to the surviving spouse. According to their wills, upon the death of the survivor, everything passed in equal shares to the two kids, Henry and Sarah. Henry was named personal representative (executor) because he lived closer to his parents and was around when they needed someone. When Tom and Sally died, Henry became personal representative, but chose to favor himself in the distribution of the assets (rationalizations/justifications: I took care of Mom and Dad while they were alive so I deserve more; my sibling got more than his share from Mom and Dad while they were alive so I deserve more; I have debts – gambling, drugs, alcohol, etc., etc. – to pay so I deserve more; I’m doing all this work for the estate so I deserve more . . . endlessly]. When Sarah found out about Henry’s misconduct, there was war. Unfortunately, much of the assets were already gone.

What should Tom and Sally have done? 

Start with realistic assessment of the capabilities and integrity of the first level of candidates for personal representative. Involve both children in the planning process so that requirements and expectations are clear. If you feel it necessary, set up the estate planning documents (wills or trusts) to provide for joint responsibility of both children or an independent personal representative or trustee. 

Case 4: Failure to update

Sam, being one of the smartest men on the planet, made a will from a sited he found on the internet, but never got around to changing it after his divorce from Jane. The divorce judgment revoked the designation of Jane as beneficiary of his estate and insurance, so at least Jane got nothing. However, he never bothered to update his estate plan, so his prodigal son, Rick, inherited Sam’s estate and the insurance when he turned eighteen. As predicted, within the year the money was squandered.

What could Sam have done? 

Sam should have updated ALL of his estate planning documents, including beneficiary designations on life insurance policies, IRAs, and other accounts after his divorce, or other life changing events. Knowing that he and Jane gave birth to a spendthrift, he should have placed the property in a trust to be paid to Rick when he started to behave like an adult, however long that may be. And, by doing his own legal work, Sam should have known that he had a fool for a client. He should have left the estate planning work to someone who knew more than he did.

Case 5: How Not to Avoid Probate

Max died having made a will leaving all of his property to his wife, Linda, and upon her death, to his three sons- Richard, Al, and Gerry, in equal shares. Later, Anne became seriously ill and was rushed to the hospital where she was not expected to recover. Outside of Anne’s room, the boys huddled and conspired. Al, the middle son, had just read a book “How to Avoid Probate” and was about to play lawyer. “Richard” Al said, “If mom recovers, we could avoid probating mother’s estate when she dies and save administration expenses if we put your name on the deed of mother’s home. When mom dies, you can sell the home and split the proceeds equally with us, just as dad wanted in his will”. Well, to everyone’s surprise, mom survived. Off to a lawyer they went, and mom signed a deed putting title to her home in Richard’s name. She lived another two years, and during this time, Richard, who was not married (his brothers were) moved in with mom and cared for her. After the funeral, the brothers asked Richard when he was going to sell the home. “What home” Richard said, “the house is in my name. Why do I want to sell it”? Off to the court they went and the $10.00 book would soon cost $10,000. 

What should the mother have done? 

Sometimes avoiding probate is not the best answer. Mom could have made a will leaving the property to her three children if that was her intent. Mom also could have placed the names of her three children on the deed as co-owners (joint tenants with rights of survivorship), or placed her home in a trust for the children.

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