We all hear people talk about estate plans and how everyone should have one drafted. But why is a will or a trust so important? Besides, who wants to think about the end of their life? Understandably the topic is a difficult one. But besides the normal warnings about how an estate plan can help you avoid family conflict, probate and estate taxes, I wanted to present a few real-life examples* to portray the sad and unfortunate circumstances that could have been avoided if a basic plan had been in place.

A Stepchild’s Story:

A client recently came to me asking what she could do to protect the estate of her stepmother who had recently passed away. The history was that her stepmother had raised her and been her mom for over 40 years. In turn, the client had cared for her mother during her the last ten years of her life when she was very ill. Now that her mom had passed, her stepsister, and blood daughter of her mother, had cut her off from family communications and any inheritance. This is the same stepsister who had refused to help her ailing mother in her last years and had all but disappeared from her mom’s life only reappearing when her mother had passed away. At first blush this seems simply cruel and human instincts suggests that there must be a legal remedy to aid in such a case. Especially considering this client had letters signed “mom,” she was listed as next of kin on hospital documents and there are over 40 years of evidence showing that there indeed was a parent/child relationship. Unfortunately, the opposite is true. In Arizona one must be a blood child or legally adopted to be considered an heir.  The only saving measure that could have secured this woman’s interest in her inheritance and protecting her mother’s estate from the stepsister is an estate plan. If the mother had even a simple will drafted that named her beloved child – who was never her child legally but who was her child in every sense of the word – her daughter would have avoided the harsh reality that she had zero options once her mother passed away. Now this poor woman has to grieve her mother’s passing and the fact that there is nothing she can do to protect her mother’s estate from a crooked family member.

This scenario is particularly relevant because in the U.S. today, many families are blended families. While parents get divorced and remarried, it is common that the stepchildren bond with the stepparent. Sometimes, the stepparent becomes the only real parent the child has a relationship with. While there is normally no chance of formal adoption because the natural parents are still involved, the only other way to connect yourself to your stepchild and vice versa is through estate planning documents and beneficiary designations.  If you have a blended family or even if there is someone in your life who you dearly care for but they are not a blood relative, I encourage you to have a plan drafted to specifically name that individual.

A Beneficiary’s Story:

A man contacted me who had been operating a limousine business for just about two years. The woman who had purchased the limos and was allowing this man to use them for business purposes had passed away unexpectedly. While she had left no formal will, she had written instruction to transfer all of the limos into this man’s name. He was ecstatic because now he could continue to operate his small business and keep the bookings he already had for months in advance. Or could he? Trouble shortly followed when he realized the loans on these vehicles had not been paid off.  In order to keep the limos he would have to come up with the balance of the loan.  Within weeks this man could no longer operate his business, he had to forfeit the vehicles he had been using and he had to cancel all of his bookings because he didn’t have the income to even apply for a loan for a replacement limo.

All of this could have easily been avoided if the woman had created an estate plan.  One important item to note is, when a vehicle is gifted in a will or a trust the instructions must include that the estate will pay for the debt attached to the car. Otherwise, even with a properly drafted estate plan, the beneficiary will be responsible for the loan.

A Cousin’s Story:

A young man contacted me regarding the untimely death of his 21-year-old cousin who was like a sister to him. The 21 year old had been very depressed after losing her mother – the only other relative active in her life.  Her father had been estranged for decades. The 21 year old’s estate consisted of a 1-bedroom apartment, some personal belongings and a monetary inheritance from the life insurance her mother had in place. Upon her passing, her cousin wanted to get inside her apartment to organize her personal effects and clear out her belongings before the apartment complex would clean out the apartment discarding all contents to get it ready to rent. Even though the cousin had been listed as the emergency contact the apartment complex would not, and by law, did not have to let him inside the apartment.  In order for him to gain access he had to pay for a special administrator filing through the court. Once he did gain access, it was evident that things were missing but it was impossible to prove because he did not have pictures to show what the inventory of the apartment was prior to his cousin’s death. To compound matters, he was not listed on the bank account that contained the life insurance proceeds in excess of $75,000.00. This meant that the account would have to be probated and because the deceased did not have a will the State of Arizona intestacy laws would determine the beneficiaries. In Arizona, when someone passes away who does not have issue, or children, the inheritance goes up to the parents. Since her Mother was already deceased, that meant her Father, the person whom she had zero relationship with, would take everything. At this point the young man had a difficult decision to make. Would he probate the estate and let the funds go to her Father, the man whom he knew she would not want this money to go? Or would he do nothing and eventually let the state take the money? Either way, he would be left with nothing.

This heartbreaking tale could have been avoided if the 21 year old had a will. She could have named her cousin as the beneficiary and effectively disinherited her estranged Father. The lesson is two-fold in this case. Not only is it important to have a plan created or updated when you come into an inheritance, no matter the size, but it is important for every adult to have a plan whether they are 20 or 80.

As you can see, it isn’t the every day occurrence you create an estate plan for. It is the exceptions and circumstances that are unforeseeable that we plan for. I encourage you not to wait until tragedy shakes your world to have a plan in place but to have one created now. Our legacy, our wishes, and our protections for our loved ones are only as good as what we have in place before something happens.

*These examples have been taken from real life scenarios but have been changed slightly to protect the individual and safeguard their privacy.