Estate Plan Changes

Sometimes an estate plan changes without somebody intending to change it. Here are a few places where this occurs.

A couple purchases a new piece of real estate. Remember, what happens with a piece of real estate after the death of an owner is based on the ownership structure when the person buys the real estate. So let’s say a couple has a plan where a house is supposed to pass to some trust beneficiaries under a trust. For purposes of this example, let’s say that this is a married couple in a blended family. The house was supposed to pass to the husband’s children under his trust.

After the trust is signed, the couple sells their house and buys a new home. The title agent that is handling the closing asks the couple, “How would you like to take title to this home?” The husband and wife say, “We don’t know.” The title agent replies, “Probably as joint tenants with rights of survivorship. That’s what everybody does.” The couple says that’s what they would like to do.

Fast forward a few years. The husband dies. Because of the joint ownership that the couple set up when they bought the new home, the house goes entirely to the wife. What about the trust? It doesn’t matter what the trust said. The trust was not the owner of the home. The wife is the sole owner of the house and she gets to do with it whatever she pleases. And yes, that means leaving it entirely to her own kids.

Can this same thing happen without buying a new home? Sure. It can also happen with a refinance. Let’s run this example with the same facts. Husband and Wife own a house. The house is in their trust. House goes to husband’s kids under the trust. The couple refinances their mortgage. As part of the refinance closing, the house is transferred from the trust to the couple as joint tenants with right of survivorship. Husband dies. House goes all to wife. Too bad for husband’s kids.

It’s important to avoid these estate plan changes. Contact me today to review your estate plan.