Estate planning, drafting a will, transferring property when you die – these can be a minefield of unintended consequences, especially if you don’t consult an attorney. In this article, let’s explore just a few examples of the many things that can go wrong.
A common mistake is to put the property in joint name with an adult child so that it automatically passes to the child when you die and “saves” you the attorney’s fees. This idea has many pitfalls. If the child dies before you, you return to the starting point. It may not be a problem if you have time to fix that, but what if you have an accident together and never get a chance to turn things around? Or what if you never get to do it? Now your heirs will have to validate your assets, which will cost them much more than it would have cost you to see an estate planning attorney.
Creditors are also a consideration. Did you know that your child’s creditors could use your property to collect your child’s debts? If your child is on the title, the child owns it. Creditors can attach real property for the collection of a judgment. They can seize bank accounts. When that happens, it’s up to you to try and undo it. Proving that something is really all yours, recovering funds, releasing a frozen bank account, or removing a lien can be very difficult and doesn’t always work. It usually requires the help of an attorney, which costs more than you would have spent on an estate planning attorney.
Another popular idea is to leave everything in the hands of an adult child because that child “knows what you want to do with him” and will divide things when you pass away. This can take many forms, including joint title, naming only one child in a self-made will, or simply telling that child what he wants without discussing it with anyone else or taking any formal steps. What could go wrong? Plenty! For one thing, like in the example above, the child could die before you or at the same time as you. You are also putting your child in a difficult position if there is any dissension between your children. You might not think your little darlings would behave that way, but money and pain do strange things to people: tempers flare, siblings don’t get along, and sometimes the kid who was supposed to dividing the property decides to keep everything. Stories abound of fights between children, ultimately costing expensive legal fees and leaving behind broken relationships. Even if you’re sure this won’t happen to you (famous last words), consider the other extreme: Will your child feel so guilty or self-effacing that he’ll give everything to his siblings and keep nothing for himself?
Writing your own will or trust can also spell trouble. If you do not follow the required formalities, the document will not be valid. If there is anything ambiguous about what you wrote, a court will decide what you meant. That’s expensive and like rolling a dice. If you think it’s easy to be clear, think again. Take the case of the man whose will mandated that his daughter receive a large monetary gift if she survived him 30 days, and that his second wife receive everything else. The daughter died on the 28th. Who gets his share? The will said that the wife gets “everything else.” The will did not say what to do if the daughter did not survive. Does the second wife get it or does she go to the children of the man from her previous marriage? Where do you think those kids think she should go? A court will probably have to get involved and this will cost a lot more than having a lawyer write the will!
You should not try to be your own lawyer any more than you would try to be your own dentist or surgeon. As the saying goes, “You get what you pay for.” If you think do-it-yourself estate planning software is the answer, you should read Consumer Reports’ review.
