No, this is not Judge Judy. But the following scenarios do reflect a compilation of some actual situations I have encountered with some alteration to highlight potential issues. Contrary to the belief of some, signing a Will may not be the completion of an estate plan for evermore. Moreover, not having a Will can create issues as well.
Many may think that estate planning is only about estate taxes and therefore only for wealthy people. The scenarios described below may counter that notion. We view estate planning as designing a way to leave what you want, when you want, how you want, to whom you want at the least cost possible.
SCENARIO #1
I am an 80-year old widower with three children. My Will states that everything I own goes to my wife when I die. If she were to predecease me, then everything would pass to my children in equal shares.
My son recently told me that he and his wife of eight years have separated, but that they are not getting a divorce…yet. They also have two young children. I don’t know how they own or manage their assets or whether they have an estate plan.
- Is my daughter-in-law entitled to half of my son’s inheritance when I pass away? What about if my son dies after me and he’s not divorced?
- What can I do to prevent or reduce that risk?
- How can I make sure that at least some of my wealth is available for my grandchildren?
- Do I need remove my son’s name from my will to protect his inheritance?
SCENARIO #2
I’m ready to prepare my Will. I’m older than my wife and in so-so health. We’ve been married for many years and we have no children together. My wife has grown children from a previous marriage who have not lived with us.
Our major asset is our house. I assume I will die before her. I was planning to leave everything to her. But when she dies, I would like some members of my family to get some of what is left rather than all of it going to her children.
- Is there a way I can arrange that?
SCENARIO # 3
My wife and her brother lost their father (a widower at that time) several years ago. He left no will. She recently received checks refunding deposits on her father’s rental apartment, but they came in his name. We asked the realtor in writing to change the payee to include her name but were told they couldn’t do this. In addition, we recently discovered a small brokerage account in my father-in-law’s name through our state’s abandoned property website.
We have been told by the bank to acquire a “letter of testimony” to finalize this process.
I have also been running my late father-in-law’s small business for many years, including many years prior to his death. My brother-in-law has had no connection to the business and has no interest in it. It is a corporation that was, and apparently still is 100% owned by my father-in-law. Prior to his death, he told my wife that the business would be hers when he died.
- What is a “letter of testimony” and what needs to be done to allow deposit the refunds and gain access to the unclaimed brokerage account?
- How will my wife be able to secure ownership of the business?
SCENARIO #4
My mother died three years ago, leaving five adult sons, three from a previous marriage. Recently, my stepfather died leaving a brownstone valued at $1,800,000 which he had owned jointly with my mother. Neither of them left a will.
Because she knew that he would do the “right thing,” my mother told my stepbrother – a child from her second marriage – that she wanted her half of the house to be divided among her five sons. He wants to honor this request.
The issue now is in NY Surrogate’s Court and we have been told that the three sons from the first marriage are not included in the Court process. She and my stepfather jointly owned the house, so her half automatically went to him on her death, and upon his passing, it goes to his sons.
- How can my brother honor my mother’s request?
Commentary:
Some may believe that once a Will has been signed, all necessary estate planning has been completed. That is not necessarily true. The Will only operates on property the maker of the will owns in his or her name at the time of death.
- Regardless of what the Will provides, property owned jointly with the right of survivorship may pass to the surviving joint owner by operation of law1. Property owned with beneficiary designations (such as retirement accounts, transfer on death accounts and life insurance) may pass by operation of contract to the designated beneficiary2.
- Therefore, both property titling and the designation of beneficiaries should be examined to determine if they are coordinated with the desired estate distribution plan.
- Finally, a Will operates after the maker of the Will dies. What about the potential that an incapacity occurs prior to death?
The probate process, among other things, serves as a method of transferring title of a decedent’s assets to heirs3. Although a Will may designate estate distribution beneficiaries, if no probate proceeding occurs, the transfer of title of estate assets to those intended to receive it may not occur.
- If the decedent died without a Will, then the decedent died intestate4. In such a case, the state where the decedent resided at deathmay provide an estate distribution plan by designating the order in which surviving heirs may inherit4. Nevertheless, even in intestacy cases, a probate proceeding may be needed to transfer title of decedent’s assets to the designated heirs4,5.
- The state and county in which to initiate a probate proceeding is not always a straightforward issue6. It may depend on several factors making experienced legal guidance important.
- It is possible that a probate proceeding may need to occur even many years after a death when it is discovered that the decedent is still holding title to assets at the time of his or her death where the title was never transferred.
Once an heir, an account or asset beneficiary or a surviving joint tenant has received the inheritance as a function of probate or as a matter of law or as a matter of contract, it is generally their asset with the right to use, gift, bequeath or sell it as they desire.
- Sometimes restrictions on the recipient’s options and access to the assets are desired to protect them for others or to prevent their frivolous use. These restrictions may be difficult to impose where the transfer mechanism is not very flexible such as with joint tenancy and beneficiary designations. These kinds of restrictions don’t happen automatically, and experienced legal counsel may be valuable in fashioning them. In these situations, we often see trusts being used.
The process of distributing assets on death, given the potential complexities caused by blended families, the interaction of legal documents, asset titling, beneficiary designations, the formalities of probate and locating a probate proceeding, screams out for planning in advance of death. Very often, the simple situation may not be that simple. Paraphrasing Mark Twain, it’s not only what you don’t know that can hurt you, but it’s what you think you know for sure that’s just not so that can get you in real trouble.
If you think that some of the issues raised sound familiar and you’d like to discuss them further, we’d like to talk to you. Contact us for a complimentary one-hour confidential consultation. We can then collaborate with your legal advisor. Remember, we are here to help.
- https://www.law.cornell.edu/wex/operation_of_law#
- https://giving.duke.edu/blueprints/wills-revocable-trusts-and-pass-by-contract-assets-whats-the-difference; https://finance.yahoo.com/news/beneficiary-designations-vs-wills-care-140023243.html
- https://www.nerdwallet.com/article/investing/estate-planning/what-is-how-avoid-probate
- https://www.law.cornell.edu/wex/intestacy
- https://www.findlaw.com/estate/probate/probate-process-without-a-will.html
- https://www.thebalancemoney.com/how-to-determine-where-to-open-a-probate-estate-3505263
Osaic Wealth, Inc. and its representatives do not provide legal or tax advice. This information should not be construed as legal or tax advice. We encourage you to consult a legal advisor regarding any legal or tax information as it relates to your personal circumstances. CRN-6445252-022924