January 17, 2019

The Pitfalls of DIY Estate Planning

A recent case from the California Court of Appeals highlights the pitfalls of DIY estate planning and the importance of planning for contingencies in your will or revocable trust.

 

In this case, Cheryl had a handwritten will leaving her entire estate to her life partner, John, and her aunt related by marriage, Patricia. These bequests were “residuary gifts” meaning that after payment of expenses and any specific gifts, the remainder of Cheryl’s estate was intended to be distributed to her beneficiaries. In this case, Cheryl split her estate 65% for John and 35% for Patricia. Cheryl’s will didn’t say what was supposed to happen if either John or Patricia didn’t survive Cheryl.

Ultimately Patricia didn’t survive Cheryl. Cheryl’s half-brother, Bruce, and John both claimed that they were entitled to Patricia’s 35% share of Cheryl’s estate. Since Cheryl’s will didn’t say what was supposed to happen in that case, both parties went to court.

Based on its reading of the Probate Code, the Court of Appeals held that the bequest to Patricia should be treated as part of the residue of Cheryl’s estate. As a result, John received 100% of Cheryl’s estate as the surviving residuary beneficiary, but only after what was likely an expensive and time-consuming legal fight.

This result may or may not have been what Cheryl intended, highlighting the risk of DIY wills. Had Cheryl instead met with an estate planner, she would have been encouraged to think about all the contingencies that might occur. For example, she could have provided that Patricia’s share should go to other family members or a charity or she could have said the same thing about John’s share. Or she could have said what should happen if she and John were no longer together at Cheryl’s death.

A competent estate planner can walk you through contingencies and options that you might not have considered on your own.

These considerations aren’t limited to what happens if a beneficiary dies before you. Everyone’s circumstances change over time and your will can be tailored to take these changes into account.

A common example is making gifts to your children. As your children grow older, complete their education, start their careers and have families of their own, it might make more sense to have assets pass in trust for your grandchildren to help them pay for an education, buy a home or start a business.

Or perhaps one of your children has fallen on hard times. You want to make sure that funds are available to help meet their needs, but you also want to make sure their creditors can’t get anything you intend to go to your child. Again, a trust set up in your will can provide exactly that kind of protection.

The two lessons from Cheryl’s case are:
  • Have an estate planner help you when drafting your will so that any unforeseen events can be anticipated, and unintended results can be avoided
  • Review your estate plan periodically to see if it needs to be updated to reflect any changes in your wishes or changed circumstances

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