Usually, the reasons that people give for not getting professional help with their estate planning comes down to a matter of money. They fail to consider the downsides of improper estate planning which can lead to costly legal mistakes that will haunt you after death.
Here are four situations where people’s legal mistakes haunted their survivors after death.
- The first example illustrates the shortcomings of using out-of-the-box software to make a will. A case in Oregon, Illinois involved a father attempting to disinherit an estranged child by following the prompts in DIY legal software. The father failed to include small shares of stocks in his listing of assets and left out a residuary clause detailing how he wanted to distribute assets remaining after estate expenses. As a result, the disinherited and substance-abusing child received almost $400,000 worth of appreciated stocks based on the law of intestacy, which he wasted in less than a year.
- Along the same lines, the second example concerns the 2014 case of a Florida woman that reached the Florida Supreme Court. In the case of Aldrich versus Bastille, Ms. Aldrich found a self-drafting will form on the internet and used it to make a will listing specific assets that would go to her sister and further listed her brother as the heir should her sister predecease her. It happened that her sister did indeed pass before she did and Ms. Aldrich inherited some assets from her sister. Either out of ignorance or neglect, she did not add the additional assets to her self-drafted will which also lacked a residuary clause.
According to the Florida intestacy laws, the unlisted assets passed to Ms. Aldrich’s nieces rather than to the intended brother even though he produced a note from Ms. Aldrich confirming that she wanted him as heir.
These situations exemplify the shortcomings of DIY estate planning when it comes to special circumstances and point out the emotional and financial burdens falling on heirs.
- The third example, the Texas case of Selzer versus Dunn, involves two business partners who purchased life insurance policies on the other’s life to fund purchase of the decedent’s shares. As it happened, the surviving partner refused use the insurance proceeds to buy the stock from the deceased owner’s family. Subsequently, the court ruled that the surviving partner was not obligated to use the proceeds to buy stock because there was no buy-sell agreement established.
Although an attorney had drawn up three separate cross-purchase buy-sell agreements for the partners, they never followed through by signing the agreement. A cross-purchase agreement is a binding contract between partners where each agrees to buy the other’s shares upon occurrence of a specified event or events. Additionally it outlines terms of sale and sets-up the process for pricing stock based on the company appraisal.
- The fourth example varies from the previous cases in that it illustrates the imprudence of lying in a contract, rather than failing to seek professional help in estate planning. William Close purchased a 5 million dollar life insurance policy but was untruthful when answering several questions. He overstated net worth, falsely said he had never been turned down for life insurance, grossly inflated his income and denied any felony convictions.
Consequently, a death benefit payment was denied upon his death because the policy was fraudulent. Mr. Close’s legal mistakes mean his family will forfeit death benefits, receive no premium payment refunds and legal issues will continue after his death.
Please contact us to avoid problems from legal mistakes. The combined experience and knowledge of our Torrance estate planning attorneys will benefit all aspects of estate planning.