Wills – Anticipating the Problems
My early practice as an attorney in Philadelphia, Pennsylvania was in litigation. That meant that I never saw a situation until it had gone horribly wrong. I always felt that that experience provided me an advantage. When it was time to handle transactional work such as Wills and planning I knew to work backwards and ask the question first “what might happen?”
“Early Edition,” a popular television show a few years ago on a major network, followed an average man, “Gary,” who received a daily newspaper one day in advance carrying the headlines of the next day’s disasters and giving him a chance to solve them. This is a lot like what it is to be a transactional lawyer. Anticipating rightly might avoid significant heartache, expense, and, potential litigation. Transactional lawyers would regard litigation as a sign of a failed plan. However if you find yourself involved in an estate litigation case, hire an estate litigation lawyer to help you achieve desirable results.
Sometimes estates do not follow the distribution that the will makers intended. There are many reasons why this happens. A Will is not an estate plan. The plan has to be coordinated with beneficiary designations. There has to be enough liquidity to pay taxes. Sometimes assets are spent down or appreciate or depreciate considerably between the time that the Will was drafted and the time of death. A very frequent concern is that will makers do not recognize the difference between probate assets that pass by the Will and non-probate assets that do not. A well drafted Will when the will maker does not consider non-probate assets might pass nothing to the beneficiaries. Here is how this could happen.
Joe and Alice Johnson are a married couple in their 50’s. This is Joe’s second marriage and Alice’s first. Joe wants to be fair to his grown children by his first marriage. Recognizing that he has shared everything during his life with Alice and that Alice has assets of her own, he drafts a Will leaving everything that he owns at the time of his death equally to his children, Mary Jane and Joe, Jr.
Joe dies a few years after executing his Will. When Mary Jane and Joe, Jr. look to their inheritance, they discover they have nothing. How could this happen?
Joe titled all of his bank and investment accounts jointly with Alice. He and Alice also titled their residence in joint name as tenants by the entireties. Joe had life insurance. He named Alice as primary beneficiary of his life insurance and Mary Jane and Joe, Jr. as secondary beneficiaries. His car was jointly titled with Alice. Joe had a 401(k) plan at work. He named Alice as his primary beneficiary and Mary Jane and Joe, Jr. as secondary beneficiaries.
Unless some of Joe’s personal belongings, such as jewelry, clothing, furniture, and other similar items could be identified as clearly his own, there may be nothing to pass to Mary Jane and Joe, Jr.
Where did this go wrong? Joe mistakenly believed that naming secondary beneficiaries for his life insurance and his 401(k) would mean that Mary Jane and Joe, Jr. would receive at least one half of their value at the time of his death.
Actually, designation of secondary beneficiaries means that, if Alice died before Joe, then Mary Jane and Joe, Jr. would receive everything. On the other hand, if Alice is alive at the time of Joe’s death, then Alice receives everything. If Alice is alive at the time of Joe’s death but dies before distribution, then Alice’s heirs, whoever they might be, could inherit – not Joe’s heirs. This can cause some serious resentment in families.
Since the residence was jointly titled as tenants by the entireties and the bank and investment accounts were titled joint tenants with right of survivorship, those assets pass directly to whoever is the survivor on the title or on the account as the case may be. The same principle applies to the jointly titled car.
This is one reason why drafting Wills from the internet or copying a form from a book may not be the best idea. It is also why a Will is vastly different, and much less predictable than an estate plan. As with most things that are meant to be legally binding, your best bet is to work with experienced professionals like a professional estate attorney, which in this case would be someone versed in probate administration.
What may seem obvious, may not be obvious after all and asset distributions after death can take some time to get right.
About the Author Janet Colliton
Esquire, Colliton Law Associates, P.C. Janet Colliton has practiced law for over 38 years, 37 of them in Chester County, Pennsylvania, a suburb of Philadelphia. Her practice, Colliton Law Associates, PC, is limited to elder law, Medicaid, including advice, applications and appeals, and other benefits planning including Veterans benefits, life care and special needs planning, guardianships, retirement, and estate planning and administration.