I think it’s important for people to understand the consequences of inattention to legal matters and of not involving an attorney. “Penny wise and pound foolish” can be a particularly compelling adage when dealing with legal matters.
By Stephen K Lehnardt
More often than not, when an estate plan fails and litigation follows it is because the estate plan was not a good plan at all. Legal mistakes and cut-corners are liabilities not worth keeping on the books, as a growing body of case law goes to show. Do not let a legal mistake haunt your estate, your assets or your family after you are gone.
When it comes to estate planning, the liability of legal mistakes and cut-corners has a special kind of edge to it since it is so often the family or your partners who end up feeling the burden or even winding up in litigation. What do these cases look like and what terrible mistakes have been made?
Forbes recently compiled a quick list of recent litigation and legal cautionary tales worth perusing in an article titled “Legal Mistakes That Haunt After Death: Three Cases.”
Consider the following mistakes:
- Failure to make sure planning is complete and in place. In Selzer v. Dunn, two business partners took out life insurance policies on each other to fund a buy-sell agreement. The partners never got around to actually drafting the buy-sell agreement. Result: The family of the deceased partner was stuck with the shares of the company rather than the life insurance money intended to buy them out, and the court held that the surviving business partner was not obligated to purchase the stock.
- D-I-Y planning usually falls short of the mark. In Aldrich v. Basile, The decedent attempted to use a do-it-yourself will writing kit that did not properly account for state law. Later, when the primary heir died, the decedent tried to handwrite a codicil to the DIY will, but failed to comply with state law rules for codicils. Result: Part of the surviving family argued the intent of a codicil to change the will was clear while the other part of the family argued it was unenforceable.
- Lying is always a bad idea. In PHL Variable Insurance Company v. Bank of Utah, the decedent had lied extensively on his life insurance application (inflating his value to at least ten times what could truthfully be underwritten). Result: upon discovering the false and fraudulent information, the insurer canceled payment of the death benefit and refused to refund any premiums paid by reason of fraud.
Sometimes what can go wrong is obvious, and sometimes it just takes a practiced mind to understand the issues that can arise. Regardless, a simple (or grand) legal mistake is never an appropriate gift to your inheritors. If you feel that it is important enough to plan, then it should be important enough—even necessary—to plan well and completely.
For more information in Liberty, MO and the Kansas City Area about effective estate planning and to access free information and tools to organize your estate, visit our elder law and estate planning website.
Reference: Forbes (May 13, 2014) “Legal Mistakes That Haunt After Death: Three Cases”