Accidental Disinheritance: The Benefits of Reviewing your Estate Plan

Did you know…that it’s important for you to review your estate plans on a routine basis? I don’t mean that you should do so every month, but at least get in the habit of looking at it just once a year - perhaps after the holiday madness or in the fall when school’s back in session. Also, make sure to have your documents professionally reviewed by an attorney at least every three years. By not regularly reviewing your plans, you run the risk of unintended consequences or inadvertent complications or even failing to provide for your family. And who wants that?

I know what you’re thinking…how could a person who’s completed their Will or Trust fail to provide for their family? Believe it or not, it happens all the time. Recently, I met with a 75 year old grandmother whose husband died 5 years ago. When she came to me to update her Power of Attorney documents to remove her husband and add her adult children as her named Agents, I asked when she last updated her Will. She said it had been at least 5 years before her husband passed, so at least 10 years prior. Yikes! She didn’t want to re-do the Will and said that she knew that if her husband predeceased her (which he had) that everything would still go to her kids equally. And, after reviewing her Will, indeed, this is what it said. However, this was a close call because she nearly disinherited three of her four kids from receiving a substantial amount of her estate.

You see, shortly after her husband passed away, her oldest son went with her to two different banks to take her deceased husband’s name off of all four of their joint accounts. In combination, these bank accounts held nearly half of a million dollars. While at the first bank, the person helping remove her husband’s name said something along the lines of: “you know, you could avoid probate if you just added your son here as the Payee on Death (POD). This would be much simpler than having to go through a court process”. At the time, that sounded like a great idea, and so she made the suggested change at both of the banks on all four accounts. 

In simplest terms…what she had effectively done was name just one of her children (her son) as the sole beneficiary of all of the bank accounts upon her death. In good faith, she figured that instead of going through probate, her son would simply divvy these accounts up among all of her children. As far as she knew (or assumed), her son was willing to do this. But what if he wasn’t? As a legal matter, the accounts would be his, with no obligation to distribute to his brothers and sister.

• What if…All of the other siblings learned (at their mother’s death) that she took an active step to leave these only to one child? This would be terribly disheartening and confusing for them! 

• What if…the other siblings assumed that the brother had intentionally taken his mother to the bank to make this change? Suddenly, everyone distrusts each other and this is where family rifts over money can begin. At a minimum, the son would be facing unnecessary messy tax and accounting problems, but possible legal battles, and a huge conflict among siblings would be likely. This simple, innocent, and inadvertent change by my client would have created a terrible result all around!

Knowing that my client’s overall intent was to provide equally for all of her four kids, we made sure to remove the POD designation on her bank accounts. And together, we carefully went on to review her other assets to re-confirm that they would either be equal beneficiaries (such as on her IRA) or that the funds would pass through her will to them in equal shares (her condo). 

That being said…here are more GREAT reasons to routinely review your estate plans: 

1. You may want to re-confirm that the people you want to have administering your plan are listed. As much as we hate to admit it, people come and go in and out of our lives. So maybe your sister’s now ex-husband isn’t the best person to be named as Personal Representative/Executor of your Will any longer.

2. You may want to make sure that the people you want to receive your estate are still alive, and in the case that they predecease you, a plan is made for the gifts that would have gone to them. For example: if you wanted to leave a sum of money to your friend, but she passed away, should this gift now go to that friend’s children…or her husband..or to someone else?

3. As we get older, deciding when we want our children to have assets may change. For example: you may have originally set up your Trust for your children in the event that you pass away, and they were very young at the time. But now, those children are in their 40s and fully self-sufficient, so withholding their inheritance and having it managed by a third party may not be a priority any longer.

4. The tax laws may have changed since your original estate plans were created and there may be additional considerations to your plan that could be more advantageous to your beneficiaries.

5. Your assets may have changed. Something as simple as changing a brokerage account into an annuity, selling your home, or purchasing real property in another state; and how such assets are titled and designated (as evidenced from the story of my client above), could have a HUGE IMPACT on your estate plans. 

All Danneil Law clients receive a complimentary review every three years. So if this is you, please reach out to make an appointment and we’ll go over things together.