Real World Problems With Ineffective Estate Planning

Here are two common estate planning problems that can be avoided with a properly executed living trust.

In this brief article, I want to focus a bit on two issues I regularly see in my trust litigation practice that can cause tremendous hardships in a family - and that are easily avoidable.

Use a Living Trust - Don't Rely on Joint Tenancy

The first issue I would like to discuss is how important it is to have a Revocable Living Trust rather than using joint tenancy to ensure proper transfer of your property at death. Many people that are married own their home in "joint tenancy" with right of survivorship with their spouse. That means that when one of the joint tenants dies, the survivor owns the entire property. Even if the joint tenant that died had their own written Will, the property passes by operation of law to the surviving joint tenant, regardless of what the deceased spouse's Will may provide.

So here is the unfortunate scenario that I see over and over again that can be easily prevented: one spouse dies, the survivor remarries years later, then refinances the family home and adds the new spouse to title to qualify for the loan. Sometime later, the surviving spouse dies and their new spouse gets the family home. Guess who gets nothing?

The children.

Why? Because once the second spouse dies their interest in the home passes by operation of law to their new spouse, not to the surviving children.

Does this situation happen? You bet it does, and all too often. I gets calls from folks all the time telling me their mother or father had remarried years after the death of their original spouse, added the new spouse to title as joint tenants when refinancing the family home, then died leaving the children with nothing – not even the family home the children grew up in. Did the surviving parent ever intend this result? Of course not.

So, how can you prevent this from happening? The best strategy is to have a Trust and to put the family home in the Trust. Upon the death of the first parent, the Trust can provide that the family home stays in the Trust until the death of the second parent, even if the survivor remarries, and then passes on to the children as beneficiaries upon the death of the surviving parent. Simple, easy and effective.

If you own property in joint tenancy, you need to be fully aware of the consequences of such ownership and of the very real possibility that your surviving spouse may remarry, or do something with the house (e.g., sell it) the two of you never discussed or intended. The use of a Trust can eliminate these concerns.

Transfer Property Into The Trust - Don't Rely on a Pour Over Will

The second issue I want to discuss is leaving your Trust empty or, more likely, not transferring all assets into your Trust.

The problem with not transferring property into your Trust is that any asset not in the Trust after you've passed away is subject to the argument that you didn't want to put it in the Trust in the first place, even if you use a "pour over" Will. How can this happen? Let me give you a real world example from my own trust litigation law practice.

A client retained me to represent him as co-trustee of his late father's trust. The other co-trustee was his late father's second wife, who was also many years younger than the father (and was not my client's mother). The problem my client was having dealt with a large (7 figure) investment account that his father intended to put in the trust, but just never got around to it. After his father's death, his father's new wife decided to take the position that the father did not intend to put the account in the trust because the account had a payable on death designation naming the new wife as beneficiary. Thus, the new wife took the position that the large account was hers and hers alone and did not belong in her late husband's trust to be distributed to his children.

Is this really what he wanted? Of course not. But by failing to transfer all assets into his trust before his death, particularly this very large asset, he set the stage for conflict and litigation between his children and his second wife. Fortunately, my firm was able to successfully force the wife to put the funds into the family trust where they belonged.

So, how can I help you avoid these problems and so many others through effective estate planning? Call or e-mail me today and let's discuss your individual situation in detail. There is no charge for your initial consultation and estate plan analysis.

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