Learn about the dangers of oral promises; problems resulting from “do it yourself “changes, and the most important reasons to review and revise your estate plan.
Lee Drizin: Hi, everyone. This is attorney Lee Drizin. Today, we’re going to talk about the Importance of Periodic Review and Reasons to Update Your Estate Plan, Part 1. There are some things that you should know about changes, in general, for example, if you were to make changes to your documents simply by crossing out names and writing in new nominations or crossing out sections that you no longer wanted to apply, those don’t work. It’s not an effective change that would be valid. In fact, it could possibly even revoke your entire document.
You should be aware that oral promises regarding your estate plan are not enforceable and they can lead to litigation. A perfect example that involved Marlon Brando who had an estate of $100 million when he died in July of 2004. The plan excluded certain verbal promises he had made to his housekeeper to leave her certain amounts, and property, upon his passing. She ended up suing the estate and received a judgment in the amount of $125,000.
Now, you may not think that that’s significant in light of $100 million fortune, but the bottom line is that these kinds of oral promises are not enforceable. They can lead to litigation, and unnecessary delay, and cost in the resolution of your estate. Don’t keep the location of your documents a secret.
Olympic gold medalist Florence Griffith Joyner had a will when she died in September of 1998. The problem was is that no one knew where “Flo Jo” kept the plan. It resulted in a battle between heirs, which resulted in a delay of over four years to close a probate. By periodically reviewing the documents, reminding yourself of their location, and, also, letting other people know where those documents are in the event of your incapacity, or your demise, extremely important.
Things change and life doesn’t stop for anybody.
Most importantly, remember, things change and life just doesn’t stop for anybody. What I mean by that is that since the time that you executed your documents, life has continued to move on, and things have changed. Those are the reasons why you need to think about the periodic review of your plan. We recommend to our clients that you sit down and review the plan at least once every two years.
Changes to beneficiaries – who is included, excluded, amounts distributed, or timing of distributions.
The kinds of things that could be changing in your life that warrant an update to your estate plan can be because beneficiaries change. In other words, there could be a change in the family dynamics and that change could lead to the fact that you want to include someone that you previously excluded or, alternatively, you may want to include someone or exclude somebody that you had included in the plan and you’ve now decided, “You know what, I no longer want that person to receive any part of my estate upon my passing.” There may be charities that you’ve now decided that you want to include.
These changes in the family dynamics are reasons that you may want to revisit exclusions and inclusions of particular beneficiaries. For example, Benjamin Franklin’s son, William. He ended up supporting the British, interestingly enough, before and during the Revolutionary War. William Franklin ended up moving to England and never returned to America. These actions resulted in Ben Franklin substantially disinheriting his only living son.
It may be time to consider changing the formula or the allocation of trust shares between your children. Most estate plans provide for equal distribution between the children. However, circumstances may have changed. That one child, quite frankly, doesn’t need, they’ve been more financially successful than one of your other children and they just may not need an equal distribution. It may cause some hard feelings, but it may be more important to provide for the care of that other child who’s not as financially successful.
It may be that the formulas that you’ve provided for the distribution of children are no longer appropriate. For example, you may have had provisions for the distribution of half at 25, and the other half at 35, and you may feel now that those numbers just aren’t appropriate based on the maturity, or lack of maturity, of the children. Those are also important reasons to consider a change.
A perfect example of someone who didn’t update the document when appropriate was Whitney Houston. In her unfortunate demise in February of 2012, she had a will, but the will had been prepared back in 1993, about 20 years earlier, just before the birth of her only child. She was to receive 10% of her mother’s estate when she turned 21. She never updated that estate even though the estate value had grown to 20 million. Now, what she had not considered was, due to this increase, whether or not it made sense for her child to get $2 million when she turned 21, may not have envisioned that, quite frankly, 20 years earlier.
These kinds of changes to the beneficiaries and their distributions are important. There may be general formulas for the grandchildren that need to be adjusted. In other words, in most estate plans, a share allocated to a child has an outright distribution, depending on the age of the child. If the child predeceases you, that share would now drop down to the benefit of grandchildren. There may be a formula that provides, for example, a certain amount at age 21, the balance at age 30.
Again, those formulas may be outdated or they may need to be updated based on your current desires, the maturity of the grandchildren. A lot of different factors to think about with regards to beneficiaries.
There may be pets that have come on board and you may decide that you want to also include provisions allocating specific funds for someone to care for the pet. Also, probably one of the most important things that people often overlook is that since the time that you created your estate plan, is there a beneficiary that may now be suffering from a mental or physical disability?
If that beneficiary is receiving public assistance and, then, upon your passing, proceeds are going to be distributed outright to that person, they’re going to lose those benefits. One of the things to think about is the inclusion of language in your plan that provides for the establishment of a special needs trust. It’s a trust that would hold their share for their benefit and it would supplement their care so that they would not necessarily lose their public benefits.
Change in assets – should distributions be altered, inclusion of charitable bequests and details regarding distribution of personal property.
Another thing to consider is the change in your assets. In other words, you may have an increase, or a decrease, and that may affect how you want to allocate the distribution of your assets. You may have acquired new items that you want to include in the memorandum for the distribution of your personal property. Most clients don’t utilize these documents for the disposition of tangible personal property. An example of where this became a huge mistake was reported in the New York Times regarding Robin Williams.
Robin Williams had done a great job of having an estate plan that disposed of his assets. However, it was reported that there was significant conflict that developed between the three children and his widow that he had from the prior marriages, over how cherished belongings, clothing, collections, and personal photographs were going to be disposed off.
In other words, the personal representative, or, if you have a trust, the successor trustee, has absolute discretion in how to distribute those items. If you haven’t provided for the specific distribution of those personal items, there’s no guidance to the trustee and then he or she have to exercise their discretion how to distribute those items. It’s easy to see how that can lead to significant conflict amongst the beneficiaries.
Confirming your trust is properly funded.
It’s also a good time to think about, when you’re reviewing your trust, of whether or not all the assets that you own have been properly titled in the name of the trust. For example, is real estate, that you’ve acquired since you executed your estate plan, titled in the name of the trust. Bank accounts, life insurance? Have you updated all the beneficiaries to provide for the disposition of those assets into the trust upon your passing?
Now, there may be specific items that you’ve left in your will, or in your trust, to a particular beneficiary and you no longer have that item. Don’t worry about that. That doesn’t merit a change in your estate plan. Those gifts simply lapse. However, it’s important, don’t make the mistake that Michael Jackson made. If you’re interested to learn about that, send me an email.
Ensure you coordinate your plan with other non-probate transfers.
Think about doing your non-probate transfers now merit inclusion in the plan. In other words, whether you had a will or a trust, there are other types of transfers that you may have that are what we call non-probate asset transfers. For example, life insurance. Life insurance, if you’ve named a beneficiary, doesn’t have to go through the probate estate nor does it have to go through your trust. We’ve had numerous occasions where spouses identify each other as the beneficiaries, they haven’t named alternate beneficiaries, and then upon the passing of the second spouse, the asset now has to run through probate.
There may be an account that was a joint account that an adult child has with a parent. Upon the passing of that parent, by operation of law, the account goes to the adult child. Now, the child hasn’t moved that bank account into his or her trust. Again, as assets change, those are appropriate times to think about updating your estate plan. Those are just a few of the reasons to think about periodic review.
Please look for part two, with additional reasons to consider the importance of revisions and updates to your plan. You can also download our ebooks off our website for more information. If you have questions, please don’t hesitate to reach out to us by email or give us a telephone call. Take care now.
For more than 30 years, Attorney Lee A. Drizin has practiced in the areas of estate planning, probate, trusts, guardianship and real estate matters representing clients throughout the state of Nevada.
Drizin Law is providing this information for educational purposes only. It should not be construed as legal advice or a legal opinion as to any specific facts or circumstances. This information is based on general principles of Nevada law at the time it was created and you should be aware laws frequently change. Moreover, the laws affecting you may differ depending on the circumstances. You should consult with a qualified attorney in your own state or jurisdiction concerning your particular situation. Review of this information does not create an attorney-client relationship.