Estate planning, writing a will, passing on property when you die – this can be a minefield of unintended consequences, especially if you don’t see a lawyer. In this article, let’s explore some examples of the many things that can go wrong.
One common mistake is putting property in common names with an adult child so that it automatically passes to the child when you die and “saves” attorney fees. This idea has many pitfalls. If the child dies in front of you, you go back to zero. It’s probably no problem if you have the time to fix that, but what if you were in an accident together and didn’t get a chance to change things up? Or what if you never got around to it? Now your heirs will have to verify your assets, which will cost them a lot more than it would cost you to meet with an estate planning attorney.
Creditors also mind. Did you know that your child’s creditors can use your property to collect the child’s debt? If your child holds the title, the child is the owner. Creditors can seize real estate to collect judgment. They can decorate bank accounts. When that happens, it’s up to you to try to undo it. Proving something is truly yours, getting the money back, freeing up a frozen bank account, or removing a foreclosure can be very difficult and not always work. It usually requires the help of an attorney – it costs more than you would have spent on an estate planning attorney.
Another common idea is to leave everything to one adult child because that child “knows what you want to do with it” and will split things up when you give it up. This can take many forms, including a joint address, naming only one child in a self-made will, or simply telling that child what you want without discussing it with anyone else or taking any formal steps. What could possibly go wrong? Many! For one thing, as in the previous example, the child can die before you or at the same time as you. You are also putting your child in a difficult situation if there is any disagreement at all between your children. You might not think your little loved ones would act this way, but money and grief do weird things to people – nerves flare up, siblings don’t get along, and sometimes the kid who was supposed to divide the property decides to keep everything instead. Stories of animosity between children abound, which eventually leads to exorbitant legal fees and broken relationships. Even if you’re sure that won’t happen to you (the famous last words), think on the other extreme: Will your child feel guilty or self-defeating so much that your child gives everything to his siblings and keeps nothing?
Writing your will or trust can also cause trouble. If you fail to follow the required procedures, the document will be invalid. If there is anything ambiguous in what I wrote, the court will decide what it means. This is as expensive as rolling a dice. If you thought it was easy to be straightforward, think again. Take the case of the man whose will commanded that his daughter receive a large monetary gift if she survives him for 30 days, and that his second wife receive everything else. The daughter died on the twenty-eighth day. Who gets its share? The commandment said the wife gets “everything else”. The will did not say what to do if the daughter did not survive. Does the second wife obtain it, or does it go to the man’s children from his previous marriage? Where do you think these kids should go? The court will probably get involved and this will cost much more than having a lawyer write a will!
You should try to be your own attorney no more than you try to be your dentist or surgeon. As the saying goes, “You get what you pay for.” If you think estate planning software is the answer, you should read the assessment done by Consumer Reports.