What comprises the pieces of an estate plan today is often more complex than ever before. A few generations ago, most estate plans consisted only of simple wills spanning no more than one or two pages, thus an estate plan review may not have been needed. Today, the totality of estate planning spills out onto a wide spectrum of documents. Perhaps you have a will, a living trust, powers of attorney and an advance directive. However, depending on your situation, the documents that are part of your overall estate plan may be more than just those. Whether you are creating a plan, updating your plan or reviewing your plan, it is important to take stock of all of your estate planning goals, assess all the documents that are needed to carry out those objectives and then review all of them to make sure they are working together harmoniously.
100 years ago, in many instances, estate plans were simpler. People our great-grandparents or great-great-grandparents' ages, as they entered their twilight years, composed brief wills that distributed their assets to their loved ones and that was the total extent of their plans. Today, the accomplishment of estate planning goals may be contained in many places beyond just your will. Certainly, if your have a living trust, then that document is a key item in achieving your objectives. However, as laws change and planning strategies become more sophisticated, your goals may span across more than just your will and living trust leading to the need for an estate plan review. Many states have have laws allowing people to place transfer-on-death or pay-on-death beneficiary designations on wide range of assets, from bank accounts to houses, for example.
One recent court case from Florida shows just how far-reaching this can be. A South Florida man, Andrew Shaw, died in 2012. His will called for the distribution of testamentary gifts to his wife of three years, Natalia, that were worth approximately $103,000. The man also had an IRA. That account named Natalia as the sole death beneficiary, and she received a $480,000 payment as a result. The wife ended up suing the personal representative of the husband's estate, though, claiming that the representative improperly refused to issue to her an additional half-million dollar payment that she was owed upon the occasion of her husband's death.
This payment obligation was not contained in the husband's will, nor in any trust. Instead, the document that was at the center of this lawsuit was the couple's prenuptial agreement, which stated that the wife was entitled to a $500,000 payment from the husband's “estate” when he died as long as neither spouse had filed for divorce. In this particular situation, the wife lost because of the way the prenuptial agreement defined the word “estate.” While, in some areas of the law, an “estate” may mean only a person's probate estate, this prenup specifically defined “estate” in a way that it included distributions from wills, trusts and non-probate accounts with death beneficiary designations. Because the wife had already received $103,000 of assets through the husband's will (the testamentary gifts) and another $480,000 from a pay-on-death account (the IRA), and because of the way the prenuptial agreement defined “estate,” the courts decided that she had already received considerably more than $500,000 from the man's “estate,” and wasn't entitled to anything additional.
In Shaw's case, his prenuptial agreement affected his estate planning documents, and vice versa. The Shaw case serves as a clear reminder of one of the biggest benefits of a routine estate plan review. Whether you've experienced a change in the form of a major life event, like a divorce, marriage, birth or death, or you've made a personal decision to alter your planning goals, the changes you make to your plan can have a “ripple effect” across multiple different legal documents. Through a careful estate plan review, you can ensure that any changes you seek to make are done in a way that will allow all of your legal documents to continue work together as they should.