True Stories of DIY Estate Planning Failures
- harveyskis
- 4 hours ago
- 2 min read
Penny Wise and Pound Foolish
Let's examine the unfortunate situation a client recently experienced because they tried to save a few dollars. My client, “Bart,” was the only son of an elderly woman whom we will call Marge. Marge had remarried after her original husband, Homer, died about ten years ago. She owned her own home, but resided with her current husband, Ned, in his home. Marge had been renting her place to Bart for the past few years.
Marge wanted her home to go directly to Bart as her sole beneficiary when she died. Bart found a legal form online for Marge to establish a revocable living trust to carry-out her wishes. Bart and Marge drafted their own language in the trust giving the house to Bart upon Marge’s demise. Marge signed the trust and had her signature notarized. They filed it in a cabinet and went on with their lives.
The problem was that nobody ever executed and recorded a deed transferring Marge’s property into her trust. Additionally, she never signed a pour-over will as another piece of her estate plan.
When the living trust was signed, all parties were amicable with each other. However, as Marge became older and in need of more urgent medical care, Bart and Ned began to have significant differences of opinion about the appropriate course of care for Marge. The issue festered long and hard enough that Bart and Ned fell out of favor and were no longer on speaking terms when Marge ultimately died.
You can imagine Bart’s shock when I advised him that Marge’s house would not go directly to him through the trust because it was never put into the trust. (A trust can only control property which is transferred into it.)
The situation was exacerbated by the fact that Marge did not leave a pour-over will when she died. This meant that her house was subject to Colorado intestacy laws. These intestacy laws grant the surviving spouse of a decedent significant rights to property that he would not otherwise have if the property would have been included in the trust, or alternatively if a pour-over will would have been executed that would have directed all property owned outside of the trust into the trust or to the intended beneficiaries enumerated in the trust.
Instead, Ned is entitled to the first $150,000 of Marge’s estate, plus ½ of the remaining balance. This is a significant problem because Marge’s estate consists almost exclusively of her residence, so the house might need to be sold if Ned wants to reduce his portion of the estate to cash.
Don’t be penny wise and pound foolish with your estate plan. Don’t be Bart. If you need to plan your estate or make adjustments to an already planned estate, please contact us. We would be happy to help. You can call me at 303-716-9666 or email me at Harvey@hjwlaw.com.
You may also use this link to schedule a complimentary 15-minute discovery call to get started today:
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