Don't Let This Happen To You

The following are examples of problems that can be avoided by obtaining the help of an estate planning attorney. Do not let these stories become your reality. Contact the Kisner Law Firm today.

Wills Created During Second Marriages
Anita and Francisco were 35 years old when they decided to get married. Both of them had been previously married and divorced and each had two children from their prior marriage. Francisco had been living in an apartment before he got married; he did not own a home. But Anita owned a home and that is where Anita and Francisco chose to live after getting married. Not long after getting married, they each created their own will, in which each left all of his/her assets to his/her spouse and if such spouse was no longer alive, half of his/her assets to one spouse’s children and the other half to the other spouse’s children. For example, if Anita died first, Francisco would inherit all of Anita’s assets. Then, under their current wills, when Francisco died, half of his assets, which then included the assets inherited from Anita, would go to his children and the other half to Anita’s children. Anita died first and Francisco inherited all of Anita’s assets. Francisco later created a new will that left all of his assets to his own children. He did not include Anita’s children in his will. Therefore when Francisco died, his children inherited everything and Anita’s children inherited nothing.

The unintended results of this scenario could have been avoided had Anita and Francisco consulted with an estate planning attorney. An estate planning attorney would have advised the couple to create a revocable living trust that provided the following: on the death of the first spouse that dies, all of that spouse’s property would go automatically into an irrevocable trust for the surviving spouse’s benefit but that on the survivor’s death all of the assets of the irrevocable trust would go to the first deceased spouse’s children. Because such a trust is irrevocable, it could not be changed by Francisco after Anita’s death. This would have ensured that Anita’s children would inherit their mother’s estate upon Francisco’s death and that Francisco would be able to live in Anita’s house until he died.

Providing for Disabled Children
Michael and Linda had just celebrated their 30th wedding anniversary when they were killed in a car accident. They left behind two adult children, Daniel and Rebecca. Daniel was disabled at birth and is currently receiving Supplemental Security Income (SSI) and Medi-Cal (Medicaid) benefits. SSI and Medi-Cal are government programs that help only those who have very limited income and resources. Michael and Linda died without a will. Following the laws of intestate succession, a probate court divided Michael and Linda’s estate in the following way: Half of the estate to Daniel and the other half to Rebecca. Daniel’s inheritance disqualified him from receiving further SSI and Medi-Cal benefits because his inheritance put him above the income/resource levels that he must stay below in order to continue receiving government benefits. Daniel therefore had to spend down his inherited assets back to the poverty level so that he could reapply for the SSI and Medi-Cal benefits he had been receiving.

Daniel’s disqualification from SSI and Medi-Cal could have been avoided. An estate planning attorney would have advised Michael and Linda to create a revocable living trust that would also create a “special needs trust” for Daniel. The special needs trust could have named Rebecca as the trustee. This would have allowed Rebecca to pay for Daniel’s needs that were not covered by the government benefit programs by using the principal/income of the trust. The special needs trust also could have provided that if Daniel died before Rebecca, the remainder of the trust’s principal would go to Rebecca or to Rebecca’s children. The creation of a special needs trust would have been recommended by an estate planning attorney. Had Michael and Linda obtained such advice, Daniel would not have been disqualified from receiving government benefits and the family’s estate would have been preserved for Michael and Linda’s heirs.

Creating Estate Planning Documents on Your Own
Jamal and Vanessa have been married for many years and have acquired a significant net worth. Jamal discovered that he could save hundreds of thousands of dollars by creating certain estate planning documents that avoid probate and eliminate or reduce estate taxes. Having been well educated, he decided to save legal fees and prepare his own estate planning documents. He purchased a “home-lawyer” software package where he obtained a trust form that he filled out and signed. The trust form provided that upon the death of the first spouse to die, the entire combined estate would be divided equally into a revocable survivor’s trust and an irrevocable decedent’s trust or “bypass” trust. Jamal died in his late 60’s. After his death, Vanessa consulted with an estate planning attorney who advised her that the trust form Jamal used was applicable only to small estates. The attorney also advised her that the ½ of Jamal and Vanessa’s estate that went into the irrevocable decedent’s trust was more than the federal estate tax applicable exclusion amount and that over funding the decedent’s trust would cause an immediate estate tax liability of over $100,000 dollars.

The unintended consequence of Jamal’s actions could have been avoided by seeking the help of an estate planning attorney before Jamal died. Jamal could have taken the documents he created to an estate planning attorney who would have reviewed them and informed Jamal of the consequences of such documents. An estate planning attorney would also have been able to recommend a different estate plan for Jamal that better met his goals of avoiding probate and reducing estate taxes. The money that Jamal would have spent on a consultation with an estate planning attorney would have been insignificant compared to the $100,000 that his wife lost to estate taxes as a result of creating estate planning documents on his own.