Estate planning is deceptively complex; it is tempting to ‘do it yourself’. After all, almost everyone knows about a power of attorney and a will. Unfortunately, there are many ways for a plan to go terribly wrong. In some situations, no plan at all is effective. Other times, no plan, or incomplete and faulty planning brings needless financial and emotional hardship to loved ones.
Do you know the factors in your life that make estate planning, or lack of planning, vulnerable to disaster?
Below is a story of heartbreak, financial difficulty or family disruption that could have been avoided with effective planning. The story is real; with changes to protect confidentiality. It’s one of many stories highlighting ways a good plan can go wrong, the perils of not planning at all, the danger in do-it-yourself, and Buyer Beware if you don’t use an estate planning attorney.
Ways a Good Plan Can Go Wrong
Problem of Joint Tenancy
A single woman with four kids (Mom) had a trust that held her run-down house and her large brokerage account. Mom did not feel she had access to an attorney because the trust had been prepared by a “trust mill” many years before and Mom did not know the name of the person that drafted it or who to contact about updates. Mom was aging, and her health was declining.
One daughter was local and helpful, and Mom wanted her to be able to help with financial affairs by being a co-signer on her account. Mom and daughter went to the broker and were told that daughter couldn’t be a signor on the account because the account was held in the name of Mom’s trust; daughter wasn’t a trustee. Mom was frustrated and told the broker she needed her daughter to sign.
Mom accepted the solution offered by the brokerage company; she took the account out of the trust and made the daughter a joint owner; “problem solved”! Daughter could have been a ?co-signor? with the account out of the trust, and we can guess that the broker told her she would avoid probate if daughter were a joint owner. The account had something in the range of a half million dollars in it; the value was of much greater value than the home, which was the only asset that remained in the trust and the only other asset Mom owned. Everything in the trust was to go to Mom’s four children, in equal shares.
When Mom died, daughter was told by the broker to provide a copy of the death certificate and then the account would hers. Daughter thought?, or decided?, or rationalized?, that Mom must have been rewarding her for being such a good helper. Daughter decided to keep the funds as her own, all of them. The other siblings called foul and retained lawyers; a big expensive fight ensued. The other three siblings were absolutely certain that Mom had intended the money to be split according to the terms of the trust. Daughter joint owner said Mom never clarified the situation; she just made daughter a joint owner. Mom’s gone at this time, so she can’t weigh in on her real intent.
In the end, Daughter shared the account; several attorneys made money, and the relationships between the siblings will not likely fully recover.
What should have happened? When the brokerage house told Mom, she couldn’t put a non-trustee signor on the account; a better response would have been to make her daughter co-trustee. Daughter was acting as a Co-Trustee in any event; it would have been the proper solution. An estate planning attorney could have helped her for less than an hour of legal time. It was a mess, and it didn’t need to be. A good plan needs to have a check-up now and then. Very sad outcome.
Do you understand your estate plan? Do you know the factors in your life that make estate planning, or lack of planning, vulnerable to disaster?
Give the attorneys at Hyatt McIntire & Associates* a call; we are problem solvers and believe the best solution is to be proactive. We can help.
*Formerly known as the Law Office of Paulla Hyatt-McIntire