INADEQUATE ESTATE PLANNING--SOME HORROR STORIES
Consider this a cautionary tale: A widower--we'll call him John Doe--had one child, a son. Over the years, he and the son grew apart--he'd actually not seen the child for 30 years and didn't even know where he lived.
Mr. Doe, meanwhile, enjoyed a long-term, 20-year relationship with a woman to whom he wished to leave all his property at his death. Deciding to prepare his own will, he printed a generic form from the internet. He filled it out, leaving his property to his companion and only a few dollars to his son.
Unfortunately, Mr. Doe had his companion serve as one of the two witnesses. Under Ohio law, because she witnessed the will, the bequest to her became void, with the result that the estranged son inherited his father's entire estate. The longtime companion received nothing.
"In this true-life case, the widower's attempt to save a few dollars resulted in dire consequences for a person he loved," notes attorney Mark Bever, of Schwartz Manes Ruby & Slovin, who worked for years as a Magistrate in two Probate Courts.
"For people who have not yet taken steps to put their plans in place--they don't want to spend the money, they're too busy, they can't decide who should receive their property or be guardian of their minor children, they don't want to talk about dying, or they think estate planning is only for the very wealthy--this unfortunate outcome ought to motivate them to seek advice from an experienced estate planning attorney before it's too late," Bever continues.
Other Scenarios
Attorney Bever shares other true-life horror stories taken from his legal practice and his work as a Magistrate:
No Power of Attorney, No Good Luck
A single gentleman in his 60s crashed his motorcycle and was in the hospital in a coma for several months. He owned a house, bank accounts, a brokerage account, and several rental properties that were titled in his name alone. He had not executed a Power of Attorney document that would have named an attorney-in-fact to handle his financial affairs in the event he became incapacitated. Without the Power of Attorney, no person had legal authority to pay his medical expenses, insurance, utilities, and other bills, and no person could legally collect his tenants' rent checks.
His brother was forced to have himself appointed guardian by the probate judge to gain that authority. It took three weeks for the hearing to be held in the court. He had to testify in court, obtain a fiduciary's bond, file a detailed inventory of his brother's assets, change the title on the bank and brokerage accounts to the name of the guardian, and each year prepare a detailed accounting to be reviewed by the court that listed all receipts and expenditures, with copies of bank statements and canceled checks as proof.
He also had to gain prior approval from the court before he could spend any of his brother's money, and the guardian's attorney had to counter-sign each check he wrote.
Joint Tenancy with Rights of Survivorship: A Bad Idea
A woman in her 70s wanted her children to receive her money at her death. She had an attorney write a will giving all her property to her five children equally. She kept all her funds at a financial institution in CDs and checking, savings, and money market accounts. Only one of the five children lived in the state. She placed all her CDs and other accounts in joint names with the local child, thinking that as she became older she would need to have the child help her make deposits and pay bills, and that it would be convenient for the child to have access to the accounts.
After she passed away, however, the child redeemed the accounts and kept all the funds. Under Ohio law, the accounts were considered joint accounts with rights of survivorship, and the child did not have to share the funds with the four siblings despite their mother's clear directions in her will.
Do-It-Yourself Planning Equals Needless Taxes
Nearly all of an elderly widow's assets consisted of stock of the Fortune 500 company from which her husband had retired many years ago. She did not have a good grasp on how much the stock was worth, and she did not generally discuss her financial affairs with her four children.
She had read about the cost and delay of probate, and she heard from a friend that if she put her shares in joint names with her children and grandchildren, her estate would not have to go through probate. She had also heard about estate taxes, but she believed that adding her descendants' names on the shares would avoid any tax. The friend was right--her family saved a few thousand dollars because her stock passed automatically and without probate to her children and grandchildren. Her family, however, had to write checks to the federal government and the State of Ohio totaling almost $1,000,000 because her joint ownership did not exempt the stock from estate taxes. If for the last eight years of her life she had implemented the simplest of plans by giving her children and grandchildren $10,000 each per year, she would have saved her family over $500,000 in estate taxes.
Who Will Care for Your Minor Children?
A couple in their early 30s had one small child. The wife died of cancer. Less than a year later, the husband was killed in a car accident. The parents had not executed wills with which they could have declared who was to serve as guardian of the child in the event of their untimely deaths.
Two sisters, one from each side of the family, stepped forward, each claiming that she believed the parents would have wanted her to be guardian. Each hired an attorney and filed an application in the probate court asking to be appointed guardian.
The court's clerk shook the little jar that was on her desk and randomly pulled out the name of one of the court's six magistrates. That magistrate, who had never met the parents, was the person who decided, after two days of rancorous testimony, where the child would grow up and who would care for the child until age 18.
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