Courtside Seat (III) Robert C. Port | July 12, 2021
EVERYTHING I KNOW about estate planning I learned in court.
As part of my litigation practice, I represent parties—often warring family members—involved in disputes over wills, trusts and family businesses. These disputes have common themes that teach important lessons about financial planning in general and estate planning in particular.
Driving these disputes is the enormous transfer of wealth—trillions of dollars—from the Greatest Generation to their children, grandchildren and great-grandchildren. Couple that wealth transfer with other demographic trends, such as longer life expectancies, rising health care costs and blended families, and disputes can easily erupt.
Lesson No. 1: Yes, You Need a Will. A will or, in the right circumstances, a trust expresses your intentions about what will happen to property when you die. If you die without a will, your state’s laws dictate how your “probate estate”—property without a beneficiary or survivorship designation—is divided up. That usually means a minimum share to a surviving spouse and the remainder divided among children or, if you have no children, to your parents and siblings.
No matter how much you wanted to leave money to, say, your church or a close friend, there’s usually no way to enforce that desire without a valid will. If you outlive your immediate family members and don’t have a will, your property might end up going to a distant relative you never knew. If you have minor children, a will can also identify who you want to be their guardian if you die. Without a will, a court proceeding—with the potential for prolonged and expensive disputes—might be necessary to determine who becomes their guardian and who controls any property they inherit as minors.
Lesson learned: Spend the time and money to have a competent attorney review your situation and prepare appropriate estate planning documents, and then revisit them periodically. The laws of each state vary, so the estate plan or trust created by your cousin in Florida might not make any sense—and could be invalid—if you live in Montana. Don’t be penny wise and try do-it-yourself estate planning forms or software. There’s a high probability that what you create on your own may not be valid or has ambiguities that might need to be resolved in court. The money you think you’re saving will be more than eaten up by the attorneys’ costs necessary to sort things out.
Lesson No. 2: Yes, You Need Other End-of-Life Legal Documents. A financial power of attorney, a power of attorney for medical issues and an advance directive for health care lets you identify who’ll make important financial and health decisions if you’re incapacitated and gives directions to those folks. Without these documents, if you become incapacitated, no one has the authority to make those decisions on your behalf, and a court proceeding will be necessary to name a guardian or conservator. Sometimes, there’s a family dispute over who that should be, usually because of concerns about the competency or integrity of the person proposed.
Lesson learned: When preparing a will, most attorneys will also recommend that other end-of-life documents be prepared. Make sure you follow through on these suggestions.
Lesson No. 3: Keep Your Beneficiary Designations Updated. Increasingly, the disposition of property isn’t governed by a will, but by beneficiary designations on bank accounts, brokerage accounts, retirement accounts and life insurance, as well as by survivorship rights (think real estate held with right of survivorship). This property is known as non-probate property. If there’s no beneficiary designation or an incorrect designation for non-probate assets, the assets will become part of your probate estate and be distributed as your will directs or, if you don’t have one, as state law directs. Lesson learned: Make sure beneficiary designations are accurate. For instance, have you correctly named a charity? A gift to the “Breast Cancer Foundation” might generate a dispute over whether you intended to give to the Breast Cancer Research Foundation or the American Breast Cancer Foundation. Do you have a backup charity if your original charity no longer exists when you die? That’s something that happens relatively frequently with small charities, churches and synagogues.
THERE ARE MORE LESSONS AT THE LINK BELOW, read on.