Hey there, Legal Tea Listeners –This is your host, Jenny Rozelle! Today’s episode of Legal Tea is a cautionary tale – a real-life case with real-life clients with real-life facts; though names are altered for confidentiality purposes! And what are we talking about today, you ask? Well, we’re going to be chatting about something that I don’t think a lot of people know … or maybe they just haven’t really connected the dots.
So, in my little estate and elder law world, we, of course, help married couples and unmarried couples/significant others … all the time, right? Sometimes, couples come in and think there is such a thing as a “joint” Last Will and Testament. That’s not a thing – at least here in Indiana. I don’t specifically know of a state that even has such a thing, but I digress. So when you do a Last Will and Testament, you do it for yourself – like you name is at the top … “Last Will and Testament of Jennifer L. Rozelle” for example. While a lot of married couples’ Wills say the same thing – i.e. everything to each other, then everything to XYZ beneficiaries – you each have a Will referencing each other, then the “next” beneficiaries after each other.
Well, that’s fine and dandy, except did you know that upon the first death (of you and your spouse), the surviving spouse can actually just create a new Will and change who the beneficiaries are. So, think about this – lately on Legal Tea, we’ve been talking about blended families. Well, let’s keep talking about them, shall we? Say you and your spouse are a blended family … as in, each of you have kids, but not with each other. Maybe you get this woooonderful idea to do some estate planning and you end up saying, “Okay, we’re going to leave everything to each other – and then we’ll leave everything equally to all the kids.”
Then, say you pass away. Your spouse could get a new Will and yank out your kids. Crazzzzzy, right? Well, on today’s cautionary tale, a similar thing happened to our clients. Let’s name them … Ralph and Sarah. Ralph had no children, but had a dear, dear niece. Sarah had a child. So, we met with Ralph and Sarah to do some estate planning. We get to chatting about “who” is going “where” – as in who is going to serve as Executor, and Health Care Representative, and Power of Attorney … and finally, we get to the question of “Beneficiary.” The conversation got a little heated – Ralph wanted his niece and Sarah’s son as equal beneficiaries, and Sarah did not want Ralph’s niece listed as a Beneficiary.
I think ultimately, Sarah, sort of, gave up and said, “Heck with it.” So, Ralph and Sarah do their Wills and Ralph’s niece and Sarah’s son get placed as the Beneficiary (after Ralph and Sarah both pass away, of course).
Fast forward some time, not long actually at all – maybe 6 months or so – and my office gets a call from Sarah. Totally frantic. Ralph unexpectedly passed away. Completely unexpectedly. It was 2 days after Ralph had passed away – I think it was on a Saturday that it happened, and she called on Monday. Our normal office protocol after someone passes away is to schedule a call with a paralegal that helps families in the after-death administration process. So Sarah called on Monday, and we got that phone call setup with the paralegal for the following day, Tuesday. If you’re keeping track, a mere 3 days after Ralph passed.
Most of the time, this call with the paralegal involves logistics – like, where are assets, how are they titled, what can you pay, how can you pay for XYZ, etc. Well, not for Sarah – the paralegal hops on that phone call and instead of really talking about what needs to be done following Ralph’s passing, she kicks things off by talking about what changes she wants to make to HER Will. Aka, she wants to cut out Ralph’s niece. You know, I always write and type out these episodes because otherwise, I’d be scared I’d accidentally say the client’s real name … or maybe I’d blab about who-knows-what for who-knows-long …. But anyway, typing that out and saying it now still, sort of, blows my mind.
I suppose people grieve, react, and cope in different ways, so perhaps staying in “business mode” is how she grieved and coped. In her defense, I see a lot of clients do this following the death of a loved one. They don’t pop their head up to grieve, and I mean … truly grieve. Instead, they keep their head down and “stick to business.” I’m sure there’s been a psychological experiment done on “why” people do this … or “when” but that’s not what we’re talking about here!
So, Sarah has this phone call with the paralegal and the paralegal, of course, lets us know what Sarah wants/needs. Prior to Ralph’s passing, Ralph and Sarah had primarily worked with my husband, Justin, who is an attorney here at my office as well. So, the paralegal got Sarah scheduled on Justin’s calendar to sign her new Will taking out Ralph’s niece. This reminds me so much of something – and it’s something I’ve talked about on Legal Tea before. YOUR estate plan is YOUR estate plan. So, if that’s what YOU want to do, do it to it, my friend. Just because someone else doesn’t think it’s, maybe, morally “right” to do (I just did air quotations by the way!), that doesn’t matter. It’s YOUR plan.
I’m sure Ralph is above shaking his little index finger at me. Or maybe he knew that if he passed away before Sarah, Sarah would absolutely do what she did. Maybe he knew that, so maybe he isn’t waving his index finger at me!
Let me be loud and clear for you all – there are estate planning options that would have definitely prevented this. So yes, you create an estate plan to prevent this very thing from happening; unfortunately, it just requires more planning than maybe you want to do. It definitely requires more than “just” a Last Will and Testament. So yes, Ralph and Sarah could have done MORE planning – but more planning comes with a touch more expense (like legal fee-wise), and they didn’t want to spend the money. Well, the result of that decision is that Ralph’s niece is not going to get anything.
So, let’s talk about HOW this is done…
To achieve this in the most economic fashion AND cleanest fashion would involve a Trust – what happens when you have a Living Trust (whether revocable or irrevocable) is you take your assets and place them in the name of the Trust. Say for example, my husband and I have a Trust – and we take our house that is owned by Justin and Jenny, and we put the house in the name of Justin and Jenny, as Trustees of whatever-we-name-our-Trust. Let’s call our Trust the Ol’ Trusty Trust. So our house is now in the name of the Ol’ Trusty Trust. We move our checking and savings into the Ol’ Trusty Trust; life insurance into the Ol’ Trusty Trust; investments into the Ol’ Trusty Trust. Super long story short, we own very little in our personal names – our Trust owns it all.
So, when one of us passes away, the Trust dictates “what” happens and “when.” One way to accomplish protection against your spouse changing things up after you pass away, is to have the Trust “turn irrevocable” upon the first passing. If it’s carefully crafted, the Trust can be setup in a way that allows someone (could be the spouse, or it doesn’t have to be either) to make changes to the Trust should the law change and the Trust needs to be amended to do XYZ due to the change in the law. Though, that person cannot change the substantive provisions – like the “who” gets “what” and “how much” provisions. That’d certainly protect the beneficiaries from getting cut out, huh!
You know how I mentioned earlier that doing this through a Living Trust is the most ECONOMIC option – well I’m sure you’re thinking, “What?!” A little inside secret: Trusts are always more expensive legal fee-wise than doing “just” Wills. They not only provide a ton of benefits compared to Will, but they’re also much more work (because we have to get you assets transferred into the Trust!). Well, you COULD do all this through a Will, where at the first passing, assets pass through the Will and the Will creates Trusts inside it (called testamentary trusts), but to have those Trusts govern assets, the assets would have to go through probate … meaning they’d have to be individually-owned and not beneficiary-designated.
Probate has a reputation – many will try to make it sound like your worst nightmare come true. It’s not scary, it’s more annoying. It takes a while; it is a public process (I’m looking at you nosy neighbors!); and it’s costly. It’s costly because of the legal fees. So, if we wanted to do “just” a Will and put Trusts inside of it to gain protection for beneficiaries getting cut out, we’ve got the cost of the Will (minimal) but then cost of probate later (NOT minimal). 99.99999% of the time, doing a Will + probate will be more expensive than doing a Living Trust and avoiding probate.
This probably doesn’t come as a surprise – but money on the table changes people. Perhaps it’s because I do this estate stuff for a living, so I’m super used to talking about this kind of stuff, but I think it’s a very FAIR conversation to bring up to your spouse, especially if you have “just” a Will and are part of a blended family. Or, even if you’re not part of a blended family, but you and your spouse have different opinions on “who” should inherit “how much.” I’ve met with clients plenty of times that Dad thinks Johnny, the son, is a bozo and a half, and Mom thinks Johnny is her gold star child. Would Dad reduce Bozo Johnny’s share if Mom passed before him? Maybe, maybe not. But could he? 100% yes – unless there’s some solid estate planning in place!
Something, I’ll mention as I wind up this episode, is while I’m a licensed attorney in Indiana, I belong to a wonderful national organization called Lawyers With Purpose, whose members all are estate and elder law attorneys like me – so if you are a Legal Tea Listener outside of Indiana and want a trusted referral from me in your respective state, just reach out! Email is LegalTeaPodcast@gmail.com. It comes straight to my phone, so easy peasy – just shoot me a message.
Alrighty … Next week’s topic is a current event/current trend -- something I’ve seen or run across that I think would be interesting on here. During next week’s episode, we’re going to be chatting about another wild guardianship case. Remember how several months ago we talked about Britney Spears. Well, hey she’s FREE now! Thanks to the new attorney of hers that stepped in named Matthew Rosengart. Well, Matthew has someone else he’s helping now in guardianship land. So tune in for that next time. Until then, Legal Tea Listeners…be well!