Cautionary Tales - "Surprise! She Changed the Will." - Episode 142

Hey there, Legal Tea Listeners –This is your host, Jenny Rozelle! Today’s episode of Legal Tea is the “cautionary tales” topic. And on these “cautionary tales” episodes of Legal Tea, we normally talk about real-life cases with real-life clients that are things me or my office have worked on -or they are things that I think are generally good things to be aware of, so you don’t turn into a cautionary tale on my Legal Tea podcast one day! Well today is inspired by some things I recently saw online – hilariously, I had a couple tweets on Twitter or now, X, go viral … and there was a lot of talk about blended families … and specifically family fights or family breakdowns due to a biological parent passing away, then the stepparent changes the estate plan to remove or reduce the kids’ shares. I’ve seen it happen, multiple times actually, and today is about one of the examples. So, let’s dive in!

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 your name is at the top … “Last Will and Testament of Jennifer 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. Follow, so far?

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. Let’s talk about an example … 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 these clients. Let’s name them … Bob and Sally. Bob had no children, but had a dear, dear niece. Sally had a child. So, we met with Bob and Sally 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 – Bob wanted his niece and Sally’s son as equal beneficiaries, and Sally did not want Bob’s niece listed as a Beneficiary … like at all … in her Will.

I think ultimately, Sally, sort of, gave up and said, “Heck with it.” So, Bob and Sally do their Wills and Bob’s niece and Sally’s son get placed as the Beneficiary (after Bob and Sally 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 Sally. Totally frantic. Bob unexpectedly passed away. Completely unexpectedly. It was ONE DAY after Bob had passed away – I think it was on a Sunday 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 just to get immediate questions answered, give them peace of mind, etc. So Sally calls on Monday, and we got that phone call setup with the paralegal for the following day, Tuesday. If you’re keeping track, a mere 2 days after Bob died.

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 Sally – the paralegal hops on that phone call and instead of really talking about what needs to be done following Bob’s death, she kicks things off by talking about what changes she wants to make to HER Will. That is, she wants to cut out Bob’s niece. You know, I suppose people grieve, react, and cope in all sorts of 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 not a psychologist, but that can’t exactly be … good. Anyway…

So, Sally has this phone call with the paralegal and the paralegal, of course, lets us know what Sally is wanting to do. We asked the paralegal to get Sally scheduled on one of the attorney’s calendar to discuss all of this – taking out Bob’s niece. Unfortunately, for the niece and maybe not what you want to hear, Legal Tea Listeners, about this episode – but 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 SHE wanted do, she absolutely is entitled to do it. Just because someone else doesn’t think it’s, maybe, morally “right” to do, that doesn’t matter. It’s HER plan.

Though, I say that, but let me be loud and clear about something – 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. Bob and Sally could have done MORE planning through a Trust or Trusts – but more planning comes with a touch more expense (like legal fees), and they didn’t want to spend the money. Well, the result of that decision is that Bob’s niece is not going to get anything.

So, let’s talk about HOW this is done…

Like I just said, if this is something you have concerns about, to do an estate plan and providing instructions for what happens at the first death (like not allowing the other to make beneficiary changes, for example), it’s likely going to 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!

Now, a little insider secret: Trusts are always more expensive from a legal fee perspective than doing “just” Wills, but they not only provide a ton of benefits compared to Will … they’re also much more work (because we have to get your 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 (meaning if someone is nosy, they can snoop!); 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 and “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!

Alrighty … let’s wrap up this episode. Let’s shift to a sneak peak of next week, which we’re circling back to the “current trends” topic where we talk about things that are going on currently that impact my estate and elder law world – or maybe, things that I have stumbled upon on the news or social media that is relevant to this podcast. Well, if you follow me on Twitter or X, I posted that I was feeling a bit uninspired, so I asked for some help with topics for this podcast. Sooooo, next week, thanks to a follower suggestion, we’re going to talk about quirky assets – and lessons learned from them. So, tune in for that next time! Until then, be well and talk soon!

Sources:

None.