After decades of working in estate planning, I can really say I have seen it all.
This blog is all about unintended consequences. These general scenarios might help you understand why having the right estate plan in place is so important for peace of mind, protecting your family and avoiding future conflict.
Often everything starts with good intent. Parents are aging, they are thinking about how to divide up their assets to their children and they decide to give them all equal shares of their home. While in theory this seems like a fair idea, there are a lot of potential issues to consider.
- An adult child that is already residing in the parent’s home.
Whether they never left, moved back in or have been staying in the home while their parents are in care, there are often times when the sibling living in the home assumes they will just get to keep the home after their parents pass.
But, by giving equal shares to all the children, all heirs must now agree to not sell the home and can ask to be bought out by the sibling wanting to reside there. This could be a huge financial burden for that sibling and can cause friction between the family.
I have seen people have to get a reverse mortgage or refinance in order to be able to stay in the home, and that’s if they can even qualify.
What’s the solution? If your goal is to let one child remain in the home, spell it out clearly in your will or trust.
- Siblings owning a property together, passed down from their parents, and one of the siblings passes away without a will.
Passing away without a will in New York (intestate), assets are passed down as follows: If there is a surviving spouse, they get the entire estate. If there is a surviving spouse and children, the spouse receives the first $50,000 and the remaining estate is divided equally between the spouse and the children. If there is no spouse or children, the estate goes to the deceased’s parents. If the parents have passed, the estate will go to their siblings, even if they are deceased. If one of the siblings predeceases then their share goes to their heirs. You can see how complicated this can be. It also requires additional work for the attorney who has to draft affidavits of heirship, have all heirs sign waivers/consents, and if they don’t, then you need to serve them with a citation.
So if Sibling 1 passes away and they owned ⅓ of a property and they have a spouse, now they own that ⅓ and if they have children, now they own a piece, too. And they all now have a legal interest in what happens to the property and are entitled to money.
What’s the solution? Consider putting the property in a trust or setting up joint tenancy with rights of survivorship. This ensures the property passes automatically to the surviving owners with no probate.
- A disabled adult is heir to money or property.
If a disabled adult inherits money or property outright, it could disqualify them from important government benefits like Medicaid or SSI. In some cases, they may be forced to pay for services out-of-pocket until the money runs out and then would need to reapply for benefits.
What’s the solution? Set up a Supplemental Needs Trust (also called a Special Needs Trust). This allows someone to leave assets to a disabled beneficiary without disrupting their benefits. You can include a clause in your will stating that if any heir is disabled, their inheritance goes into this special trust automatically.
We talked about trusts in last month’s blog if you want to go back and read it or feel free to reach out to me anytime to talk about estate planning and the specific needs you have for your family.
Estate planning isn’t just about dividing up assets, there are small details that make a world of difference.
Note: These are just possible scenarios and solutions. Every situation is unique and you should consult an attorney to see what is best for your situation.
