DO IT YOURSELF ESTATE PLANNING NIGHTMARES
My kids gave me a coffee mug one holiday that says: “Please do not confuse your Google search with my law degree.” It’s probably because of the many stories I shared of clients trying to take care of legal matters on their own, then coming to me to fix the mess they created. I like to tell clients that even though you can research online how to do a root canal, I don’t recommend you do it on yourself. When it comes to estate planning, “do it yourself” mistakes are generally not discovered until after the person has died. It usually means that now the person’s wishes will not be carried out, and there is an expensive fix involved. I was recently reminded of a common mistake I have seen over the years, but this one had exceptionally damaging consequences. You can find thousands of articles online on how you can transfer your property to your kids and avoid probate by adding them to your deed while you are alive. While there are many reasons NOT to do it, and other, better ways to achieve the same result without adding them to the deed, it can be done — if it is drafted properly . The problem I have seen over and over again in my 33 years of practicing is that people do not prepare it correctly, and the property winds up in probate, and the parent’s wishes are not carried out.
In one such instance, a mom added her daughter to her deed to avoid probate, leaving the home to her daughter. She gave oral instructions to her daughter that upon the mom’s passing, she was to sell the property and divide the proceeds equally with her other two sisters. Unfortunately, the deed was not prepared by an attorney, but by the daughter. The daughter did not include the correct language to have the property pass automatically to her outside of probate and a probate was required. The way the deed was written, the daughter had a 50% interest and the other 50% went to all three daughters leaving her two sisters just a 16% interest each in the property. While the money could always be worked out among the sisters, there is less to go around because they had to incur the costs of a probate and the time delays associated with it. However, in this case, there were additional dire circumstances. One of the sisters was receiving Social Security disability. A large lump sum inheritance could disqualify her from her benefits. Even if she didn’t want to receive the funds, her interest became hers upon the death of her mom, and the asset would be imputed to her. How could the mom have avoided probate and not disqualify her daughter from her Social Security benefits? The simple answer is, by creating a trust. A trust acts like a last will and testament, but it is treated as a private contract, so it does not need to go to probate court, thereby saving time and expense for beneficiaries. More importantly, in this case, mom could have provided for a “special needs trust,” which would have held the money in trust for her disabled daughter so she would not be disqualified from her Social Security benefits, yet still have funds to address her living and medical needs. The moral of the story is not to gamble with your legacy. When it comes to whatever you need — plumbing repairs, electrical repairs, or legal documents — take advantage of the experience of someone who works every day in whatever area you need assistance with to avoid nightmares as described above. –Mark Martella, Esq.
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