Do It Yourself (DIY) Estate Planning…Is It Wise? – Part Two

Do It Yourself (DIY) Estate Planning…Is It Wise? – Part Two

INTRO: In Part One of this series, I wrote about how people who engage in DIY estate planning frequently think: “I can do this myself; my situation is very simple.” The number and types of drafting “traps” is countless. Now we look at how easy it is to create a serious potential problem out of what is perceived as a simple estate planning drafting task.

John Doe has a home worth $900,000, with a loan against it in the amount of $200,000. He also has cash accounts totaling $400,000. Without consulting or talking to anyone, John takes it upon himself to type up a testamentary document – Will or Living Trust – that states, in pertinent part: “on my death, my home is to go 100% outright to Betty Doe, my sister; and the rest of my assets go to Bill Doe, my brother.”

How can the document be any more clear, right? Wrong! John dies and his estate is being administered. Betty claims that John’s intention is clear from his testamentary document – Betty is to receive the $900,000 home “100% outright”, meaning mortgage-free. In other words, Betty demands that the $200,000 mortgage be paid off from John’s $400,000 cash accounts. This would result in Betty receiving the $900,000 home with no mortgage, and Bill receiving $200,000 in cash ($400,000 in the cash accounts minus the $200,000 used to pay off the mortgage).

I’ll bet you already know what Bill argues. Of course, he is adamant that John intended that Betty be distributed the house as John owned it; she would take over John’s obligation to pay the mortgage. So, Bill’s position is that he should receive the full $400,000 in cash.

Although it might be interesting intellectually to discuss whether Betty or Bill has a better legal position, the “take aways” should be: 1) Regardless of who will ultimately prevail, Bill and Betty could easily spend $50,000 – $100,000 or more on legal fees to resolve the dispute, not to mention the aggravation and damage to their sibling relationship; 2) Sadly, because John never communicated about this to anyone before he died, neither of his siblings know for sure what John intended; and 3) if John had hired an experienced estate planning attorney, the attorney would have discussed John’s intentions and drafted appropriate language to clarify those intentions (e.g. Betty shall receive the home “subject to liens and encumbrances”; or “free of liens and encumbrances”).

This article is intended to provide information of a general nature, and should not be relied upon as legal, tax, financial and/or business advice. Readers should obtain and rely upon specific advice only from their own qualified professional advisors. This communication is not intended or written to be used, for the purpose of: i) avoiding penalties under the Internal Revenue Code; or ii) promoting, marketing, or recommending to another party any matters addressed herein.

Mr. Silverman is an attorney with R. Silverman Law Group, 1855 Olympic Blvd., Suite 125, Walnut Creek, CA 94596; (925) 705-4474; rsilverman@rsilvermanlaw.com.

ESTATE LEGAL SERVICES: Need to find an estate planning attorney in Walnut Creek CA? Contact Robert Silverman at 925-705-4474 for legal advice on Revocable Living Trust, Wills, Durable Power of Attorney, Advance Health Care Directive, Special Needs Trusts, and Irrevocable Trusts & Advanced Estate Planning, including Irrevocable Life Insurance Trust (ILIT), Qualified Personal Residence Trust (QPRT), Defective Grantor Trust (IDGT), Grantor Retained Annuity Trust (GRAT), “Crummey Trust”, and various types of Charitable Trusts.

Previous Do It Yourself (DIY) Estate Planning…Is It Wise? – Part One

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