Cautionary Tales - The Problem With “Something Is Better Than Nothing” - Episode 270

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, that way you do not turn into a cautionary tale on this podcast one day! Well today is about a phrase. I know that sounds weird, but … there’s a phrase I hear a lot when people talk about estate planning: “Well, something is better than nothing.” And on the surface, that sounds pretty reasonable, right? If you do not have an estate plan, at least get something done. If you cannot afford the comprehensive plan, do a simple Will. If you do not want to meet with an attorney, use an online platform and at least get some documents in place. If you do not have time to do everything, just do the basics.

And I understand the sentiment behind that. I really do. Because there are absolutely situations where having some planning in place is better than having no planning at all. But the older I get and the longer I practice in this area, the more I question how casually we throw around that phrase when it comes to estate planning. Because sometimes, something is NOT better than nothing. Sometimes, something creates a problem that would not have existed - or at least would not have existed in the same way if the person had simply allowed the law to operate.

And I want to be really, really careful about what I mean by that, because I am not saying everyone needs some giant, complicated, 68 page estate plan. That is not the message here. Estate planning should be appropriate to the person, their family, their assets, their goals, and their circumstances. Sometimes a Will really is the appropriate document. Sometimes a beneficiary designation really is all someone needs for a particular asset. Sometimes the best advice is actually, “You do not need to do anything with this particular asset.” The problem is when we take the idea that something is better than nothing and turn it into a blanket rule. Because estate planning is not like buying a fire extinguisher and putting it in the garage. It is not simply about checking a box that says, “I have documents.” The documents actually do something. They change who receives property, when they receive it, who controls it, what restrictions apply, and sometimes what protections exist for the people you’re trying to help.

Let’s start with one of the most common examples: a simple Will. Someone comes into my office and says, “I know I need to do something, so I’m just going to do a simple Will leaving everything to my children equally.” And again, maybe that’s exactly right. But maybe it is not. Imagine a married couple with children from prior relationships. One spouse says, “I just want everything to go to my kids when I die.” So they create a Will that accomplishes that. Sounds good, right? Except now we have to ask what happens to the surviving spouse, what assets are actually controlled by the Will, what happens with jointly owned property, what happens with retirement accounts, what happens with life insurance, and whether the plan creates an unintended result for either family. Or take a parent who has three children, but one of those children has a disability or receives means-tested benefits. “Leave everything equally to the three kids” sounds wonderfully fair. But depending on how that inheritance is structured, giving that child a direct inheritance may actually create a significant problem for that beneficiary. So yes, they have something. They have a Will. But the existence of that Will does not necessarily mean the plan is better than what would have happened otherwise.

And this is where I think people sometimes misunderstand intestacy laws. Intestacy is not synonymous with “the state gets everything.” That’s one of those estate planning myths or fun things for non-lawyers to say on TikTok that drives me totally crazy. If you die without a Will, the state does not just swoop in and take your assets. There are statutes that determine who your heirs are and how your property passes. And depending on the family circumstances, those statutory rules may actually produce a more flexible or protective outcome than a poorly drafted estate plan. That does not mean intestacy is always good. It certainly is not. It can absolutely produce results that someone would not want. But there are situations where the law has built-in mechanisms for dealing with certain circumstances, and when you create a document that overrides those statutory rules without understanding what you're doing, you can lose some of that flexibility.

Think about a beneficiary who inherits money outright. A person might say, “Well, I want my daughter to get her inheritance, so I’m just going to leave it directly to her.” But what if that daughter is receiving needs-based public benefits like Medicaid? What if she has a significant disability? What if she is in the middle of a divorce? What if she has creditors? What if she struggles with managing money? What if she is a minor? What if she dies shortly after inheriting? Suddenly, “I’m leaving it directly to my daughter” is not necessarily a simple solution. There are circumstances where the law provides mechanisms, trusts, disclaimers, court involvement, or other tools that can allow an inheritance to be handled in a way that better protects the beneficiary. But if you have already created a document that mandates an outright distribution, you have potentially boxed yourself into a result that was not actually what you wanted.

And that brings me to another example that I see all the time: beneficiary designations. People often think, “Well, I don't need an estate plan because I have everything set up with beneficiaries.” And beneficiary designations are incredibly important. But they are not a substitute for understanding the overall plan. Let's say you have a retirement account and you name your two children as equal beneficiaries. Great. But one of those children is financially responsible and has no major issues, while the other has a disability or receives means-tested benefits. You've just created two equal distributions, but they may have wildly different consequences for those two beneficiaries. Or maybe you've named your spouse as the beneficiary because that's what the form told you to do ten years ago. Then your family circumstances change, but you never update it. Or maybe you've named a beneficiary who predeceases you and you have not thought through what happens next. “I have beneficiaries on everything” can sound like a plan, but sometimes it's really just a collection of individual decisions that do not work together.

And here's where I think online estate document platforms deserve a little more nuance than they usually get. I'm not interested in standing here and saying, “Everything you do online is terrible.” That's not true. There are reasons someone might use an online service. There are also people who otherwise would do absolutely nothing, and maybe an online document at least gets them to think about their estate. But here's the problem: a document isn't necessarily a plan. An online questionnaire can ask you what you want. It may be able to turn your answers into a document. But it doesn't necessarily understand why your answer creates a particular legal result or what you failed to tell it. And that's a really important distinction.

Because estate planning isn't just, “Who gets my stuff?” It's a series of interconnected questions. Who gets it? When do they get it? Under what circumstances? Who manages it? What happens if that person can't serve? What happens if a beneficiary dies? What happens if a beneficiary is disabled? What happens if a beneficiary gets divorced? What happens if there are minor children? What happens if there are stepchildren? What happens if your family changes? What happens if you become incapacitated? What happens if you need long-term care? What happens if an asset doesn't pass under your Will at all? What happens if the way you own the asset conflicts with the instructions in your Will? Those are not necessarily questions a document-generation platform can solve simply by asking you to select an answer from a dropdown menu.

And sometimes the danger is not that the document fails to accomplish anything. The danger is that it accomplishes exactly what you told it to accomplish, even though what you told it to do was not actually what you intended. That's a very different problem. If I don't have a Will, the law tells me what happens. I may not like the answer, but at least there is a statutory framework behind it. If I create a Will that says something very specific, I may have intentionally opted out of that statutory framework. And if the language I chose does not account for an important family circumstance, I may have created a much more rigid result.

Here's another example. Let's say someone has a child who is terrible with money. Everyone in the family knows it. Maybe the child has significant debt. Maybe they have a history of making terrible financial decisions. And the parent says, “Well, I love my child, and I want them to have their inheritance. I'm just going to leave it to them outright.” That's certainly an option. But then do not be surprised when that inheritance is sitting in the child's name, exposed to whatever circumstances that child is dealing with. If the parent had instead built a properly structured estate plan, there may have been opportunities to protect the inheritance from some of those risks while still ultimately benefiting the child. So again, the problem isn't that something was done. The problem is that the wrong something was done.

And I think this is particularly important because people sometimes view estate planning as a document purchase instead of a legal planning process. They'll say, “I got my Will done.” Okay, but what did your Will actually accomplish? Does it coordinate with your assets? Does it coordinate with your beneficiary designations? Does it account for your family? Does it address incapacity? Does it provide the protections you actually want for the people you're leaving money to? Does it say what happens if your first choice can't serve? Does it address the possibility that one of your beneficiaries dies before you? Does it account for the fact that your life may not look exactly the same five, ten, or twenty years from now?

And this is why I don't love the phrase “something is better than nothing” when we're talking about estate planning. Because it can give people a false sense of security. That, they feel like the estate planning box has been checked. But estate planning isn't really about whether the box is checked. It's about whether the plan works.

And that's really the point I want to leave you with today. Estate planning is not only about having documents. It's about having the right documents for your situation. And those are two very different things. A Will that does not account for your family dynamics, a beneficiary designation that doesn't account for your beneficiaries' circumstances, or an online document that doesn't coordinate with the rest of your estate may technically mean you have an “estate plan,” but that doesn't mean you have a good estate plan. And I think that's why the phrase “something is better than nothing” bothers me a little bit. Because it makes estate planning sound like a participation trophy. Like, “Hey, at least you have a Will!” But I don't care whether you have a Will just for the sake of having a Will. I care whether the plan does what you want it to do. Because if you're going to take the time to plan, let's actually… plan. Let's figure out what you own, how it's owned, who you want to benefit, what could go wrong, and what happens if life doesn't go exactly according to plan. And then let's put the appropriate tools in place to deal with those things.

So, the next time someone tells you, “Well, something is better than nothing,” when it comes to estate planning, maybe push back on that a little bit. Ask: “Is this something actually better than what would happen if I did nothing?” Because sometimes the answer is yes. But sometimes... something is actually worse than nothing. And that's why the goal shouldn't be to just have an estate plan. The goal should be to have the right estate plan.

Alrighty, 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 are relevant to this podcast. Next week, we're going to dive into what’s going on with the LA Lakers, the Buss family, and the drama over the ownership that has been all over the news. So that’s what next week is on, Legal Tea Listeners. Be well and take care!

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