Before designating property or assets to beneficiaries in a Will, the testator (person drafting the Will) must make sure the property or assets are his or hers to give!
Failure to do so creates “an estate within an estate” — property not actually owned by the estate, creating another estate that must be appropriately distributed. Discovering an estate within an estate after the person believed to be the rightful owner dies can trigger a long, costly legal mess for the beneficiaries to sort out.
Case Study One: The Land Next Door
A widow sought legal help in drafting her Will. Her husband did not have a Will when he died but, under the rights of survivorship, his wife became the sole beneficiary of whatever they jointly owned. They jointly owned a home and, she thought, an undeveloped parcel of land next door.
That land next door, it turned out, was only in her deceased husband’s name. This land was the estate within an estate.
Luckily, fixing this problem was not as complicated as could have been because she is the deceased property owner’s spouse. She needed to be appointed administrator of his estate and the property’s title needed to be transferred to her.
If the couple reviewed property deeds and created an estate plan, adding her to the property title when her husband was still alive would have been an easier, and less costly, process. Luckily, she planned for her estate and drafted a Will, so the property ownership was found before her death. Otherwise, the couple’s beneficiary children would have had to handle the complicated problem — most likely requiring intervention by a probate court.
Case Study Two: Grandpa’s House
A man left his stepson a house in a trust to use after the man’s death. The man’s Will said that, should the stepson want to sell the house, then the proceeds would be split among the stepson and other named family members. When the stepson decided to sell the home, it was discovered that the home wasn’t in the stepfather’s name, but it belonged to the stepson’s deceased step-grandfather. Thus, the house became the estate within the estate.
With escrow on the home sale coming to a close, the deal was in jeopardy, as the stepson had to take measures to take ownership of the house. That began with his seeking appointment to become administrator of his deceased step-grandfather’s estate so he could gain title to the property.
A scramble like that during a home sale, especially during our current COVID-19 pandemic, can be stressful and time-consuming.
The lesson to be learned from these cases is that advanced planning will uncover issues that are easily resolved in life. Otherwise, the estate within an estate problem could cost heirs time, money, and stress.
Circumstances change and even with the best intentions, time passes and important information isn’t always updated as regularly as it should be.
An experienced estate planning attorney like the ones at Timothy Rice Estate and Elder Law Firm can make the necessary and important updates to your estate planning documents to keep your family and loved ones well cared for in your absence. To set an appointment, contact us at 856.782.8450 or [email protected].