Here are some examples of how people are harmed when their loved one dies without a custom estate plan with a revocable living trust.
- Significant Other Inherits Nothing. A woman called me and said her significant other of 30 years died while owning 9 rental properties. The man did not have a will or a trust. Under Arizona’s law of intestate succession, the deceased man’s brother inherited all of the rental property, and his significant other did not inherit anything. The deceased man and his brother had not spoken in over 30 years. Solution: If the man had a will or a trust that left the real estate to his significant other, she would have inherited all of the land, and the estranged brother would not have gotten any of the homes.
- Creditor Gets Son’s Inheritance. A man called and said his mother died and left him $475,000. The executor of the probate deposited the money in the man’s bank account, which was garnished by the man’s creditor, who had a judgment against the man. All the money went to the creditor, and the man got none of it. Solution: If the mother left the money to the man in an irrevocable trust the mother created for her son, the money would have been asset-protected, and the creditor would not have gotten any of the money. The son could have had the trust buy and hold title to a home, and the son could have lived in the home rent free.
- Kids Fight over Inherited Assets. A single woman had a vacation home in Pinetop and four children. When she died without a will or a trust her four kids inherited the home. Two wanted to sell, and two wanted to keep the home. They could not agree on selling, so eventually, two kids filed a lawsuit asking the court to order the property to be sold and the net proceeds distributed to the four kids. After wasting a lot of money on attorney fees, the land was sold, and each child got one-quarter of the net proceeds. Solution: The mother should have created an irrevocable trust that owned the home. The trust agreement could have provided that the home would be sold if any child requested a sale.
- Estranged Son Inherits. Father had three kids, but was estranged from one of them. They had not spoken or seen each other in many years. Father did not want the estranged son to inherit any of his assets, but when the father died without a will or a trust, the estranged son inherited one-third of the man’s assets. Solution: The man should have adopted a will or a trust that disinherited the estranged son.
- Life Insurance Paid to Minor Child. A couple got divorced and the divorce decree required the man to buy a $1,000,000 life insurance policy. The purpose was to fund the mother so she could use the money to raise their daughter. Unfortunately, the man died when the daughter was 7, but the policy named the daughter as the beneficiary. This meant that the daughter owed the money, and the mother could not legally use the daughter’s assets to fund the mother’s obligation to raise her daughter. The daughter would also get total control of the money when she became 18. Solution: Parents should have created an irrevocable trust that named the mother as the trustee and beneficiary so the mother could have spent the proceeds as she deemed appropriate.
- Parents Daughter on Drugs. The parents’ 26-year-old daughter is a drug addict. When they died, the daughter inherited over $800,000. A year later, the daughter blew through all of the inherited money. Solution: Parents should have left the money in an irrevocable asset-protected trust for the daughter, but the daughter would not be the trustee. The trustee could be a trust company or a trusted adult family member or friend who would not allow the daughter to blow the money.
- Parents Daughter’s Husband Would Influence Daughter to Blow the Inheritance. The parents’ 26-year-old daughter is married to an alcoholic who would influence the daughter to blow the inherited money if the daughter were the trustee. Solution: Parents should have left the money in an irrevocable asset protected trust for the daughter, but the daughter would not be the trustee. The trustee could be a trust company or a trusted adult family member or friend who would not allow the daughter to blow the money.
Lesson to Be Learned: Create an estate plan with a revocable living trust that does what you want and protects your loved ones from bad things that can happen if you don’t make an estate plan that protects them.