A good set of documents done right and at the right time is the best prevention.
The two primary purposes of estate planning include controlling what happens to your property when you die and protecting the people who depend on you when the unthinkable happens. If you have invested significant effort into the creation of your estate plan, you hope that the documents you created reflect your personal wishes and your family’s needs appropriately.
Not every set of documents are well written, well considered or up to date. You may have heard horror stories about people who must wait years to receive their inheritance and then only receive a portion of what they expected because of the expense of prolonged probate and trust litigation. Family members fighting over the assets that someone leaves behind when they die can rip the family apart and significantly diminish the value of the estate.
Below are two unfortunate true examples (with facts and names changed to protect the families involved):
Joe’s Story: Joe’s aunt Mildred was a single person, an art history professor and collector who hired an estate planning attorney at the most prominent full-service firm in her large metropolitan city to develop her basic estate planning documents: a pour-over Will, a revocable trust, and various disability documents such as a legal power of attorney. In her documents, Mildred named Joe as trustee over her sizeable and unusual art collection, and a local professional trustee selected by Mildred’s lawyer to serve as trustee over her investment assets. Mildred’s primary beneficial interest was to give her estate to charity to benefit disadvantaged women interested in a career studying and collecting art. She signed her documents, put them in the drawer and promptly went on with her life.
Ten years later, Mildred’s memory and physical impairments resulted in her being caught up in the powerful probate system in her state and county. When Mildred died, her $10M trust estate was the subject of expensive administration claims brought by the professional trustee selected by and represented by the law firm that drafted Mildred’s documents. Joe learned the law firm had turned the drafting of his aunt’s documents over to an inexperienced lawyer who moved into another area of law not long after he prepared Mildred’s flawed documents. The Trustee duties and charitable gifts set out in the trust were almost indecipherable. The lawyers at the firm were more concerned about protecting themselves from a lawsuit arising out of the poor documents than they were about helping the estate reflect Mildred’s intent.
When the trust administration settled, the trust was depleted by approximately 70%. The trustee fees and legal fees were astronomical.
Susie Anne’s Story. Susie Anne’s mother, Marie, was married to Susie Anne’s father for 40 years, and they had three other children in addition to Susie Anne. Marie was a pioneer in the essential oils business and built a small successful regional multi-level marketing business operating out of a small town. She hired a talented young woman to develop the web site. Marie fell in love with her new hire, and she and her husband divorced.
Marie had a Will that was drawn up by a local attorney in which she assigned assets to various beneficiaries, including her new wife and her children. When Marie died, she still owed her former husband nearly $2M in various obligations arising from their divorce. In the industry, we call an estate plan that assigns assets without considering the obligations to debtors and for payment of taxes, an “asset driven plan.” A probate estate was opened and was the subject of prolonged, expensive litigation because the Will did not plan for creditors, expenses or tax payments that would be due. This estate was worth many millions of dollars, but it was largely insolvent because there was no pool of assets or cash to cover expenses. Again, estate and administration fees were astronomical, and many had to be paid by the “beneficiaries” assigned assets in the Will.
Careful estate planning can reduce the likelihood of someone contesting your wishes, preserving the wealth you pass to the next generation. How can you be sure your documents prevent such disputes?
Make your documents hard to challenge
What could Aunt Mildred have done differently? It takes time for clients to develop an understanding of the documents and a good relationship with a lawyer. Instead of putting her documents in a drawer and forgetting about them, Mildred could have sought out an attorney who was committed to estate planning to review the documents and ensure that they were consistent with her wishes over time. She could have work with a skilled drafting attorney to clarify her intentions. If you don’t understand the gifts laid out in your estate plan, chances are neither will anyone else.
What could Marie have done differently? Avoid an asset driven estate plan at all costs. Many people instinctually want to divide their assets and parcel them out as they wish, giving a house to one child, a bank account to another, an interest in a business to a third, the building where the business is located to a fourth. Knowledgeable estate planning attorneys explain the pitfalls and help moderate that instinct to avoid an insolvent estate and related issues.
Careful estate planning and frequent review will help ensure the validity and enforceability of your estate planning documents in the future when they are needed. Ask yourself, does my lawyer “care?” Wool Landon is proud to say that to date, as far as we know, none of our attorneys’ estate planning documents have resulted in these types of expensive administration issues. We are good at what we do, and we care.
If you suspect that your loved one’s Will or trust is flawed, or the administration of a trust or probate in which you have an interest is suspect, you may benefit from representation. We are an excellent option, so please call us to see if we can help.