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  • Writer's pictureJenny Rozelle, Host of Legal Tea

Cautionary Tales - Telling Beneficiaries About Estate Plan - Episode 81


Hey there, Legal Tea Listeners –This is your host, Jenny Rozelle! Today’s episode of Legal Tea is a cautionary tale, where we talk about real-life cases with real-life clients with real facts – they’re things me or my office have worked on. For today’s episode, we’re going to be talking a case where I think it beautifully exemplifies why communication is so important when you’ve done your estate plan – and, in this specific case, it happens to involve a “blended family” (which I’d make the argument that in a blended family, communication is even MORE important). So, to set things up, I think it’s appropriate to start at the very beginning – when we first met with the client at-issue under this “cautionary tale” episode.


Let’s call her Sherry. So, Sherry came to our office many moons ago, actually way before my time even and I’ve been with the office for over 11 years now, and Sherry was single – she had once been married, but divorced. From that marriage, she had two children – a son and a daughter. When she came to our office, she had already created an estate plan – specifically a Revocable Living Trust – and was looking to have us update a few things in it. That’s what we did for her. Her changes necessitated an Amendment – and in the Amendment, she changed the trustee to NOT be either of her children, but to be a professional trustee – it was actually another attorney. There were a few other minor changes, but that was it for then.


Fast forward a few years, she comes back in and meets with someone at my office about making some changes again. She shares that she’s “met someone” and they’re thinking about getting married. Let’s name him, Dave. She wanted to talk about what, if anything, she needed to do, like, Pre-Nup-wise and depending on what ends up transpiring, how she’d work Dave into her estate plan. She wasn’t really interested in giving him money, per se, but said that Dave was probably going to end up moving into her house – and she thought about maybe giving him some sort of ability to reside there, even if she passed away.


So, Pre-Nup-wise, let’s start there…I think people would be quite surprised the amount of people/clients I see in their 60s, 70s, 80s who are getting married or re-married. Sherry and Dave, like here in this story, were in their late 70s. That may be surprising to you, but like I said, I see it relatively often. So, because we see it happen so often, we’re used to having the Pre-Nup conversation. Interestingly, I think people when they hear the term “Pre-Nup” their brain automatically thinks of divorce/divorce protection, right? Well, the reason why I think it’s equally, if not important, to bring up a Pre-Nup in this situation is because … did you know that a spouse is, like, the one person in the world you can’t disinherit? The only solidified way to disinherit a spouse would be a Pre-Nup. So, oftentimes, people do Pre-Nups when they get married later in life, NOT because of divorce protection, but because they want “their assets to go to their kids/beneficiaries; and their soon-to-be-spouse’s assets to go to their kids/beneficiaries.” (Rather than to each other.)


Sherry was definitely on the right track about thinking a Pre-Nup was appropriate. It was, indeed, appropriate. So, we ultimately worked with her to get a Pre-Nup done between her and Dave – and through all the conversations relating to the Pre-Nup, is when the topic of the house came into play. Basically, Dave was selling his house and moving into Sherry’s house. Sherry, through all of this, wanted to make sure that Dave was protected and that her kids couldn’t/wouldn’t kick Dave out of the house, if she were to pass away before him. We ended up including a special provision in the Pre-Nup AND also amended her Trust to give Dave, what is called, a “right to reside” in the house, if Sherry were to pass away before Dave.


Like I said, because we’re super used to navigating these conversations, we talked with Sherry about … okay, if that happens, WHAT does Dave pay for? Utilities, taxes, insurance, upkeep, repairs, …nothing? Ultimately (and somewhat surprisingly), Sherry said that she didn’t want Dave to pay for anything; that instead, she wanted the trustee (which remember, was a professional trustee – it was another attorney) and Dave to come to a reasonable amount for the trust to “hold back” to pay for any and all expenses related to the house – EVERYTHING. She left that in the hands of the trustee and Dave – not her children. Her children’s input was not requested, required, nothing. In the notes from that meeting, it was quite clear that the attorney from my office to come to a pre-determined amount; that way, the amount was from her, Sherry, not anyone else. And if the money ran out, it ran out – on the flip side, if there was leftover at Dave’s passing, it could go through her trust still and to her kids. She declined that recommendation.


All of the legal work happened – the Pre-Nup got prepared and signed; the trust amendment got prepared and signed; and Dave and Sherry got married. Fast forward a few years more, and now we’re to just about a year ago from NOW, Sherry passes away. We hear from her kids first and one of the children, specifically, was pushing our office to provide more and more information – she wasn’t entitled to too much yet because she wasn’t the named Executor or Trustee. She was merely a beneficiary, and of course these are some murky waters. People often get a little confused and lost on who, an attorney like me, actually represents. Well, let me clear it up for all of you – in my capacity, I represent the Executor and Trustee – technically speaking, it’s not the beneficiaries. So, we have to be clear on WHO our client is, and WHAT information we’ve providing to people, right?


Ultimately, my office had to request to end the phone call with the child because she was getting HEATED … but she was getting heated because she thought her now-stepdad, Dave, was scheming behind the scenes when actually we were trying to actively trying to coordinate a meeting with the attorney, who was appointed as the Executor and Trustee. We kept assuring her that her Dave did not have any legal authority to do much, but she was definitely not hearing us – she just kept saying, “Mom promised us she didn’t put Dave in charge … and she promised us we were still beneficiaries!” It was clear she had it in her mind that 1) Dave was in charge (he wasn’t) and 2) Dave had schemed his way into being a beneficiary (he hadn’t). But we couldn’t tell her that yet.


This reminds me so much of a common question that I get from clients often, which is, “Should I give my kids copies of these documents?” I don’t think they realize how loaded that question is – mainly because every family is so different. Like everything in life, there are pros and cons about everything – including this question. Some choose to give their kids (or whoever) copies of their estate planning documents – the “pro” of that is they’ll have copies of your documents at-the-ready, right? The “con” is if you ever change anything, you have to remember who has copies and to make sure they discard them – and get them new copies. Or, maybe another con is that you don’t feel like it’s really too much of their business yet.


Others choose to simply share with their kids (or whoever) WHERE they’re going to keep their documents and not give them copies. That way, if changes are made, you just have your originals that need to be updated and not have to pull back on the ones from your kids (or whoever) due to the changes. And some people do neither – they won’t give their kids copies of the documents NOR will they tell them where the documents are. Instead, they will say, “Call my attorney. They’ll know what to do!” There’s really no wrong answer – just depends on what you feel is best, especially if there’s some contentious relationships going on.


But I bring this whole topic up because Sherry chose the “neither” option – and while I’m still not sure if that was a good thing or a bad thing, what I can tell you is that her daughter was red-hot-mad at us for not telling her anything (because we weren’t really allowed to tell her anything since she was not the executor or trustee). Though, her words and actions were probably from a place of fear, confusion, and heck – her Mom had passed away, so her emotions were ALREADY HIGH, right?


We’re used to these high emotions – it, sort of, comes with the territory of often dealing with family members that are not in the best shape. But I have to tell you that I think much of anger, confusion, and fear could have maybe been avoided – and that’s what I think the takeaway from this episode should be. That, I want this episode to cause you to stop and really think about how much or how little you want to share with your people – there’s no wrong answer as you know your family better. You will know better if it’s better for them to get copies of documents; to be involved in the estate planning process; to NOT get copies or be involved; to share everything or to share nothing; etc. That’s the exact purpose of this episode … is to encourage you to think through this.


At the end of the day, Sherry’s estate, except Sherry’s house which Dave just has a right to reside in the house until he passes, … anyway, Sherry’s entire estate went to her two kids. Then, at Dave’s passing, the house will go to her two kids. So, the daughter’s anger, concern, and confusion … was essentially unwarranted. She was convinced that Dave had schemed his way into everything and they were getting nothing. That was not the case. The biggest thing about this case was that Dave NOR the kids were the executor and trustee, so we had to wait on that person to come in for a meeting, to hire us, and to get moving before we were able to share much with Sherry’s kids. In hindsight, I think it was a good move that Sherry picked a third party to serve in the executor/trustee role, but I suppose I just wish that maybe Sherry had a more intentional conversation with her kids about 1) who was in charge (it wasn’t any of them!); and 2) Dave was not a beneficiary – they still were. I’m certain that would have saved the daughter from so much worry.


Interestingly, once the process got underway, Dave and Sherry’s kids worked out a good plan and process for the administration of Sherry’s estate, including how to deal with the house that Dave was able to reside in. So, it has a “happily ever after” kind of feel, but it sure didn’t feel like a lovely “once upon a time” type of beginning. That’s for sure! Alrighty … let’s wrap this episode up and shift to a sneak peak of next week. We are back to the current events/current trends topic – where we talk about something I’ve seen or run across, maybe on the news or social media, that I think would be interesting on here. During next week’s episode, we are going to be talking about a story I ran across on Aaron Hernandez, who is the football player that passed away somewhat recently, and after his passing, his child received a trust - that such trust has, sort of, been in the news recently. So until next Tuesday, Legal Tea Listeners, take care and be well!


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