A WILL FOR ALL SEASONS
“Okay, how do you want to leave your property?” I say to the woman who has come to see me about drafting a Will.
“I want to leave my house to my son Robert,” she says. “I want him to have the house; it’s worth about $200,000. I want to leave $50,000 to my brother and $20,000 to the church. I want to leave my personal belongs to my sister. I want to leave the remainder of my estate to my other two children; it’s worth about $250,000”
When people dispose of their property in a manner such as this, there is the potential for serious problems. Sure, everything will work out for the best if they own their home and have their other assets when they die, but what if they don’t? What if they sold their home two years before they died, because they lived in a nursing home the last two years of their life?
What if the nursing home costs $6,000 a month – most do – and at the time of her death not only doesn’t she own the home but only owns $40,000 in cash assets? Will Robert take the $40,000? Will her other two children? Will the brother receive his $50,000 or the church its $20,000?
Most people don’t think about these issues when they have a Will such as the one described above drafted. In fact, if you asked them about these issues, they might scoff and think the scenario unlikely. They’ll tell you that they’ll change their Will if that happens.
But what if they can’t change their Will? You can’t change your Will if you lack a certain level of mental capacity. You have to understand the significance of what you’re doing in order to sign a Will, and the fact of the matter is, many people who reside in nursing homes are there because they don’t understand the significance of many things that they took for granted earlier in their lives.
Furthermore, thinking that you’ll never, under any circumstances, end up in a nursing home is wishful thinking. Every person in a nursing home thought they wouldn’t end up in a nursing home, yet most nursing homes are full. So, someday, it could happen to the best of us, no matter how much our family tells us that they’ll always take care of us at home.
Nursing homes provide necessary, medical services – services that many family members simply could not perform. And nursing homes charge for those services.
So, what happens to the woman’s property in the situation described above?
The son who was to receive the house receives nothing, since the house has been sold and the proceeds paid to the woman in full before her death. This situation is called “ademption.”
The residuary beneficiaries – the woman’s other two children – also receive nothing. Bequests to residuary beneficiaries only receive a share of the estate if there are sufficient assets to satisfy the general and specific bequests.
In this case, the general bequests are the bequests to the brother ($50,000) and the church ($20,000); however, there is only $40,000 in the estate at the time of death, an insufficient amount of assets to satisfy the two general bequests, totaling $70,000.
Since there are insufficient assets to satisfy these general bequests, each bequest is reduced proportionately. In this case, the brother would receive 80% of the $40,000, or $32,000, and the church would receive the remainder.
The sister would receive whatever personal belongings the woman owned at the time of death.
If you notice, the children – who were the woman’s primary beneficiaries – actually received nothing. That’s typically the problem with this type of Will: The persons who are the first to lose out are the people who were the closest to the decedent.
Make sure the Will you have drafted carries out your intentions not only today but tomorrow, as well. Circumstances change, and your Will should be drafted in such a manner as to accommodate those changes.
Life has a way of changing when we least expect it — whether it’s health, finances, or family dynamics. When something shifts, your planning should too. Taking time to revisit your documents now can save stress and surprises later.
Estate plans are often created during one stage of life and forgotten as families, finances, health, and relationships evolve over time. Revisiting documents periodically can help ensure older plans still reflect current realities and future goals.