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Case shows how estate planning snafu snubs intended beneficiary

The devil is in the details. This phrase is often true when it comes to legal matters. A recent case is bringing attention to just how important the details are when it comes to estate planning.

What happened in this case?

The case involves a woman who was going through a divorce. In an attempt to ensure that her soon to be ex did not receive any of her assets, she updated her estate plan. Her estate was now to transfer to her mother. If her mother predeceased her, the estate would transfer to a named charitable organization.

When the woman died, with her mother having predeceased her, the charitable organization was notified. Unfortunately, there was an issue with the will. The will stated that personal property would be passed to the charitable organization. It did not state what would happen with the woman's real property.

Since the real property was not accounted for, it was to be transferred by way of state law. If the woman's divorce was not finalized prior to her passing, this could mean that the assets would transfer back to her estranged husband - the exact result she was trying to avoid.

Did the estate transfer to the husband?

The charitable organization took the lawyer who drafted these documents to court, arguing that the woman's intent to transfer the assets to the organization was clear. The lawyer argued three points: first, he questioned who the woman intended as the beneficiary, then he demanded that a written agreement was required to move forward with the suit and finally he claimed there was a statute of limitations violation.

Here is how the arguments broke down:

  • The charitable organization was not the intended beneficiary. This argument was countered with the fact that the estate planning documentation that is present clearly establishes the organization as the beneficiary. The court agreed with the charitable organization.
  • A written agreement between the charitable organization and the property owner was required for the challenge to survive. The court disagreed, supporting the organization's contention even though no written agreement was present.
  • The statute of limitations bars such claims. Statutes of limitations are put in place to limit the amount of time that can pass between an action that may be illegal and the ability of the victim to hold the offending party accountable in court. In this case, the court noted that when it comes to estate planning issues, it is not uncommon for many years to pass before a beneficiary is aware of the issue. As a result, the court did not agree with the statute of limitations argument.

Ultimately, the court held in favor of the charitable organization.

What can I learn from this case?

This case provides two main lessons:

  • Read your documents. It is extremely important to review estate planning documents and discuss any concerns with legal counsel. Without careful review, unintended beneficiaries may profit from your estate.
  • Use a reputable attorney. The National Law Review notes that the attorney used to put together the questionable estate plan was not a lawyer that was well versed in estate planning matters. Instead, it is best to choose an attorney that routinely does estate plans and is available to answer any questions you may have.

Following these tips can help you to better ensure your estate plan is successful.

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