Everybody wants their children to inherit their property and have no problems after they die. And, that’s why they want to avoid probate. They hear it is always slow, complicated and expensive. While I note that description is not true, there are simple mistakes that guarantee it will be slow, complicated, expensive and many times, nasty.
Here are the Ten Mistakes, plus a bonus 11th!
1. The Oral Will
Everybody expects Mom and Dad to leave things to all children equally. But, sometimes a son or daughter will say “Dad/Mom said I should get this.” For example, let’s say Dad had a workshop so the son moved all of his power equipment and tools to his house. Maybe its Dad’s truck. The value is in the thousands of dollars. The other children object.
2. Joint Account in Name of One Child
The law says that the surviving joint owner owns the entire account. It does not matter if the parent has a Will that says everything to be shared equally. A variation of this one is that Mom says to another child, your sister will share the account with everybody after I die. I put her on it to help pay my bills. It will take a court order to solve this one.
3. Beneficiary Designations That Do Not Match the Will.
Most Wills say all property should be split equally. But, some parents have beneficiaries on life insurance policies or annuities that do not name all children. It does not matter if “Dad had that policy to pay for his funeral.” The those policies will go to the beneficiaries and the Will will not matter. And, not only do they receive the policy proceeds they will still get an equal share of everything else.
4. Lifetime Gifts or Unpaid Loans
Often parents help children out either in time of need or just to be helpful, such as giving money for a down payment for a house. If a parent does not give the same amount to all children, their will be fights over whether the gift child’s share should be reduced.
5. Late in Life Will or “Estate Plan”
If a Will, or a joint account, or beneficiary on a policy, is made late in life when a parent needs help, and if the plan benefits a child who has been caring for the parent over the other children, chances are high that it will be contested in court.
6. Failure to Update a Will after a Child Dies
Many people have Wills that say if a child predeceases their share is split among the surviving children. But what about their children, Mom/Dad’s grandchildren? They will be left with nothing regardless of their relationship with their grandparent.
7. Naming Minors Beneficiaries
A minor can own property but cannot manage it. If a minor child inherits money or property and the gift is not in trust, the probate court must appoint a conservator to manage the property until the child is 18. Then they get it all. A trust is a better option to hold the property.
8. Trying to Force Children to Get Along
Often a parent is very distressed that the children do not get along. They sometimes try to fix that by making them joint owners on property. Or they make them both the personal representative of the estate. It doesn’t work. The children will have something new to fight over.
9. Naming the Wrong Person to Administer Estate
Suppose Mom names her oldest son the personal representative or successor trustee of a trust of her estate. But, he is too busy with his job to work on the estate. So a year later the other children are tired of waiting and go to probate court when he does not resign.
10. Second Marriages with children of prior marriage
It often happens that folks in a second marriage try to treat it like their first. They leave all their property to their spouse after they die. What about their children? Years later when the spouse dies they get nothing.
11. Failing to Provide for Children Who Cannot Have Money
As we all know there are adults who have a need to have their property managed. It might be because a child was born with a disability and will lose her government benefits if she inherits. It might be because the child is addicted to drugs or alcohol. “Momma didn’t want her money to go to drugs.” Some children have problems with IRS tax liens, bankruptcy or divorce. These cases are best resolved with trusts, otherwise the only option is to try and fix the problem in probate court.
Conclusion
There are other mistakes that can require the probate court to solve the problem. The best way to avoid these is to speak to an expert who knows “what can go wrong.” I like to think we are such experts.
And, I should recognize that there are other reasons for estate planning. Some folks want to minimize taxes. For example they may want to leave large IRA to a low income child and investments to a high income child. Some want to keep a cottage, farm or business in the family, but they see that all their children will not benefit from the property equally. Some may use the cottage and some may not. Some may work in the business and others not.
You have your unique concerns. Give us a call to come on in and get things set up so that life will work out smoothly after you go to your great reward.
Wishing you all the best,
Jim
