From time to time I travel with my family over to the east coast of Florida where my wife’s parents and brothers reside. Each of my wife’s two brothers has three girls. So when you add my three daughters to the mix, my mother-in-law and father-in-law have 9 granddaughters and no grandsons!
Our family just doesn’t make boys I guess!
So my daughters and several of my nieces piled into our SUV to go watch a movie. My brothers-in-law and their wives were busy so I had a good day with the kids. But have you seen how much they charge for a movie these days? And we went to an IMAX movie as well – which is about double the price that they charge for a normal flick. Then you add in the popcorn and sodas – the bill was as much as if we went to a premium steak house. But it’s all good –the cousins love spending time together.
Sometimes you end up paying for others when they’re not really your own, and obviously that’s part of the price of being in a family together. But other times it comes up unexpectedly. Like in your estate plan. Today I’m going to show you how you might have beneficiaries lurking in your plan who ready to inherit some part of your bounty – even if they’re not named in your legal documents.
The cast of characters include:
Uncle Sam – If you don’t plan ahead to take advantage of the income, estate and gift tax laws to their fullest, Uncle Sam may have a hand in your pocket that he otherwise might not have had. While those with enormous estates usually won’t get by without having to pay some level of tax, Uncle Sam’s reach into your pocket might be deeper than it truly has to be.
State Taxing Authorities – Like Uncle Sam, the states are imposing more and more taxes on all sorts of things. With planning and forethought their share of the estate can be mitigated if not eliminated.
Your Spouse – While many intend for their spouses to be beneficiaries of their estates, in second marriages especially this may not be true. You both may have entered the marriage with “what is yours will go to your family and what is mine will go to my family.” This may or may not happen depending upon how you construct your estate plan, and whether you formalized your mutual understanding in an agreement. Without a formal, legal agreement, it is quite possible that your spouse is entitled to receive as little as 30% of your estate or as much as 50% (or more) depending upon a variety of factors.
Your Son-in-Law/Daughter-in-Law – What you leave your children will benefit them for the rest of their lives and then what is left will go on to your grandchildren. Or will it? Without building protective elements into your plan, it is conceivable that your son-in-law or daughter-in-law will enjoy more of the inheritance you left your children than you had planned.
Your Illegitimate Grandchild – I once had clients who failed to tell me that their son had an illegitimate child when their son was a young man. I imagine that was something that they may have been embarrassed over or didn’t want to talk about. Unfortunately the son predeceased his parents. Parents’ wills gave predeceased son’s share to his children, per stirpes. Thank goodness it wasn’t too late before the clients finally told me about the illegitimate grandchild. Guess who the per stirpes distribution would have included had we not changed the documents?
A beneficiary you thought you disinherited – Suppose you want to disinherit a beneficiary that is now included in your estate plan, replacing him or her with someone else. If you bring that someone else to your lawyer’s meeting with you, even if they didn’t have any influence over your decisions – there may be a presumption that they did influence you. In such an event, your disinherited beneficiary may be able to nullify your new estate plan after your death.
The bank trustee that can’t be changed – Unlike your lawyer or your accountant, both of whom your family can choose to fire if they feel that their fees for the proposed estate administration are unreasonable, if you have named a bank trustee and have not included provisions allowing for someone you have confidence in to remove and replace the bank – then the bank can charge whatever they deem appropriate for their services. Make sure that your document contains removal and replacement provisions for anyone or any institution that may be serving as your personal representative or trustee unless you believe that the beneficiaries themselves are more dangerous.
The charity you signed a pledge for but didn’t include in your plan – Sometimes people make pledges to include a charity in their estate plan. Years go by, and the pledge may be forgotten, or deemed not as important as it once was. If you made such a pledge and subsequently did not include the charity in your plan, the charity may have legal recourse against your estate. Charitable institutions can sue your estate for a pledge if they reasonably relied on it and made budgets, allocations or other noteworthy gestures in reliance on your pledge. While many charities won’t go so far as to litigate, more are enforcing their rights.
These are just a few of the possibilities. It’s almost like a movie in and of itself, worthy of a soda and a big tub of popcorn. Enjoy the show!
©2012 Craig R. Hersch

