by Bruce L. Dorner
As frugal Yankees we save money by clipping coupons, buying items when they are on sale, and recycling as much as practical. When it comes to legal matters, no one likes to pay a lawyer more than is necessary to solve the problem. Sometimes, clients don’t share all the facts and background, so as a lawyer, I’m often challenged to find the missing pieces to the puzzle.
Permit me to share some interesting legal maneuvers performed by clients (not all of them mine). Some of these tricks resulted in severe legal wounds to the wallet and some are just amusing.
Consider the dedicated husband who worked in the computer industry and knew that he was learned and wise in the ways of wills and estate planning. He bought an inexpensive program for his computer and ran through the questions to prepare his own will. The result wasn’t bad, but he didn’t realize that having his wife serve as a witness to his signature made the will invalid. Ooops! He also forgot that his wife needed a separate will too!
How about the client who studied his insurance needs carefully and purchased enough insurance to protect his wife and two young children. He wanted his wife to get the money when he died. If his wife didn’t survive him, the money would go to his kids. However, he named all three as beneficiaries. Guess what, his widow got one-third of the money and the rest is now tied up until the minor children reach the age of majority. She can’t use the kids’ portion and now struggles to make ends meet.
I’ve encountered other home-brew estate planning tricks. One estate started with the husband showing me his late wife’s will. It had a provision cutting the husband out of the estate. Well, in New Hampshire, a husband or wife has a right to claim a portion of the deceased spouse’s estate. Even more interesting was that his wife’s daughter had already contacted an attorney to help probate the estate. The attorney was a long term friend of mine and I called her to discuss the situation. I told her I had the original will and would deliver it to her. She paused, gasped and said, “no, Bruce, I have the original will.” Both of us became even more concerned as we realized that there was more than one original of the will. There should be extra copies of wills, but not duplicate signed original documents. It took several months to sort out the mess in probate court to achieve the desired result. Fortunately, both the stepdaughter and husband agreed on distribution.
It’s also interesting as to how many people fill out the forms to create their own Limited Liability Company (LLC) or create a corporation. However, rarely do they have an LLC operating agreement or actually issue shares of stock in the corporation or membership interests in the LLC. In the event of a law suit against the business, it folds like a house of cards. These annoying but formal steps are necessary to protect the integrity of the business entity. After all, you want to protect your personal assets, not increase your liability exposure.
One of my pet peeves is the proliferation of so-called living trusts. You put all your assets into the trust so you don’t have anything to go through probate court when you die. The concept is nice, but the implementation is difficult. I’ve had a number of clients who want to avoid probate, but can’t explain why they think this is important. I see even more estates that have some property owned by the trust, while other assets are still held in their personal name, outside the trust. Unfortunately, if all of the assets are not properly titled to the trust, you still have to go through the probate court. You paid a great deal of money to create the trust, but never fully funded it. The brass ring remains just a few inches outside your grasp. Living trusts are not for everyone.
In the same vein is the use of joint accounts. Grandma loves her little grand daughter and leaves her $10,000 in her will. Grandma is worried where the money will come from to fund the gift so she puts the grand daughter’s name on a Certificate of Deposit worth about $50,000.00, as a joint tenant. Guess what, the little tyke gets $60,000. $10,000 from the will, and all of the Certificate of Deposit. Be careful, joint tenancy is a powerful tool — if used properly. Generally, assets held jointly are not subject to control of the probate court.
So, if you’ve enjoyed hearing some of these war stories, maybe you’ll have a soft spot in your heart for your family lawyer. After all, we’re trying to protect you from these types of errors and prevent you from shooting yourself in the foot.
This article provides general information only. It is not legal advice. You should consult with your own attorney before making any legal decision.