Articles Posted in WILLS

Accidental disinheritance is a growing problem, not only in San Diego, but across the country. We have seen it in the cases of Anna Nicole Smith and Heath Ledger. Failure to update estate planning documents or beneficiary designations can cause unintended disinheritance or unequal distributions that may not have been intended.

One of the ways people accidentally cause a disinheritance is in a stepparent situation. As an example, suppose a man has a will he created when married to the mother of his children. After she dies, he remarries and writes a new will leaving everything to his new wife. When he dies, the new wife inherits everything and then leaves her estate to her own children. The husband’s children (her stepchildren) are disinherited, which was probably not the father’s intent. The way to avoid this was to have a trust set up with the new wife which could have provided that his wife had the use of the assets during her lifetime but upon her death, the husband’s children participated in the distributions. This is a situation where an experienced estate planning lawyer would have been worth the expense to draft an appropriate will or trust to take into consideration possible future scenarios.

Another way that a failure to update can cause difficulties is where a child is born after the estate plan is created and the child has special needs. A trust, if drafted correctly, usually will provide for after born children without the necessity to update the trust, however, if a child born after the trust is created has special needs and is on public assistance, a special needs trust needs to be prepared so if the parents die, the child does not receive his inheritance outright and lose his public assistance.

Many elderly people in San Diego are cared for at the end of their lives by caregivers and friends rather than family members. Sometimes they want to provide for those caregivers or friends in their will or trust. Such bequests however can be challenged by family members and other beneficiaries after a death.

The California Probate Code lists seven categories of people who are presumptively unable to inherit under a will or a trust. The list includes the person who drafted the will or trust, the law firm, attorneys or employees of the law firm that are asssociated with the drafting and “care custodians.” A care custodian is defined to include a number of agencies and any “individual providing health care services or social services to elders or dependent adults.”

Those persons mentioned in Probate Code section 21350 who are left an inheritance are subject to higher scrutiny before they can inherit. They can inherit only if they can prove by “clear and convincing evidence” that the bequest to them “was not the product of fraud, menace, duress, or undue influence.” This can be difficult to prove after the death of the individual making the will or trust.

When people give particular assets to someone upon their death, what happens when that asset is no longer in the estate at the time of death? “Ademption” is the term used in the area of wills and trusts to describe a situation where property left to a beneficiary is no longer in the estate when the decedent dies. In that case, the property is “adeemed”, i.e. the gift “fails” and the beneficiary does not receive it.

As a example, a father leaves a condominium to his daughter- maybe because she lives in the state where it is located or he wants to keep it in the family and she would be most suited to inherit. He provides in his will or trust that his other two children divide the rest of his estate. Years later he decides to sell the condo but forgets to update his will or trust. When he dies, the condo is not part of his estate and since the daughter isn’t mentioned anywhere else in the estate plan, she is accidentally disinherited.

Another example is where a woman provides in her trust that she wants her 1000 shares of XYZ stock to go to her grandson. The rest of her estate is to be divided between her two children. She decides to sell the stock (or the company dissolves) but she forgets to update her trust to leave her grandson some other asset or cash bequest. When she later dies, the stock is not in her estate and the grandson gets nothing.

You would think that people who have practiced law would know the benefits of a well drafted estate plan. I guess it is like the old adage that “the cobbler’s son has no shoes.”

Who knows how many lawyers in this country do not have a will or a trust. Abraham Lincoln, a lawyer before he became President, died intestate (without a will). Maybe like most of us he wasn’t anticipating dying at the age of 56.

Some judges have died without an effective estate plan. In 1910 a Judge of the New Jersey Court of Appeals left no will with an estate of between $100,000 and $500,000.

If you create a will or a trust, you can make any kind of gift you want to whomever you want. You can also make stipulations that a certain event must occur for the beneficiary to receive the inheritance. Some people, for example, provide for distributions to children or grandchildren if they graduate from college or they stay off drugs.

Some more outrageous bequests or conditions have been:

A Finnish business man left 780 shares of a rubber boot company to the residents of a nursing home in Finland. That company later became Nokia, which makes cell phones, making all the nursing home residents millionaires.

Many of us in the San Diego area start the New Year by resolving to lose weight, quit smoking, or spend more time with family. The top New Years’s Resolutions are:

• Stop smoking or drinking • Increase physical fitness

• Lose weight • Reduce stress at home or on the job • Spend more time with family/enjoy life more • Get out of debt or save more for the future

The San Diego Probate Court has many cases involving will and trust litigation. Wills and trusts can become the subject of litigation even when prepared by an experienced estate planning attorney. Issues which can become the subject of a will contest or trust litigation can be issues relating to the successor trustee or executor, codicils or amendments, the distribution provisions, or the management of the estate assets.

Here are some red flags which tend to trigger litigation that should be addressed at the time you draft your will or trust:

1. An “unnatural” disposition of an estate. Clients obviously have the right to leave their assets to anyone they wish however an unusual or unnatural disposition is more likely to be challenged. A “natural” disposition would be leaving your estate to your wife and then to your children. What is not “natural” is disinheriting a child, leaving substantial assets to a non-family member or to someone who has provided care to you, or leaving your entire estate to a new spouse, charity, or a pet to the exclusion of other heirs.