Estate Planning Blunders

People expect scary stories at Halloween. Below are some stories involving estate planning blunders that might give you a shiver. Let us see what lessons can be drawn before it’s too late.

What happens when a person’s out dated estate planning documents are preserved but the current estate planning documents are missing? Consider a decedent who preserved a living trust that was no longer relevant after she transferred her residence into a different trust. The old trust was preserved and to-hand after her death. The current trust holding title to the mother’s residence, however, was not to-hand. The daughter not knowing better began administration of the old trust. She incurred unnecessary legal expenses that never would have occurred had the correct trust been preserved.

Not only is it dangerous to misplace important documents but the problem is exacerbated when the wrong documents are preserved and thus appear what should be administered. Be careful about what documents you keep and what documents you destroy.

Consider a mother who puts all her money into a joint bank account with her son. The mother’s residence and personal property, however, are held in her living trust for distribution amongst all her children. When the mother dies the surviving son claims the joint account as his own as the surviving joint tenant. The joint bank account monies are not part of mother’s trust. When the successor trustee administers the trust estate he or she may not have enough money on hand to pay for the mother’s funeral, her debts, and the expenses of trust administration. Also, the money in the joint account goes entirely to her son and not equally amongst all the children which may or may not have been what the mother intended.

Consider a trust or will in which a father specifically gifts different pieces of real property to each of his children. One of these real properties is sold, the father’s trust or will is not updated, and the father dies. If the child who was to receive the real property that was sold survives then he or she has a claim for any remaining portion of the unspent sale proceeds or to any subsequent assets so purchased. This depends on whether the unspent proceeds can be traced. Had the father updated his estate planning documents to adjust for the sale it would be much better.

Consider the trust of a once married couple who after the dissolution of their marriage leave assets titled to themselves as trustees of their trust. The husband is awarded 100% of the residence. The wife individually signs an inter spousal deed over to the husband. It is ineffective because title to the residence is held by both as co-trustees, and not individually. The deed needs to be signed by both as co-trustees. Now the ex-wife has since remarried, has a different surname, and has an address unknown by the ex-husband. Getting a deed signed is now more complicated.

To be forewarned is to be forearmed. Having your estate plan regularly reviewed every five years with a qualified Lake County estate planning attorney — and sooner when there are material changes that affect your plan – is to be forewarned. Taking action may make the difference between whether or not there is a happy ending.