retirement

Plan carefully when avoiding probate

Don Taylorq_v2.gifDear Dr. Don,
My ex-husband put his oldest son on all of his "payable on death accounts," intending to make it easier for the son to receive and manage the funds after death. This was also done to save that part of my ex-husband's estate from probate.

My ex and I have two minor children together. My stepson was to be executor of his father's estate, which would have provided very well for all three of the children. According to my stepson, the trust agreement never was signed.

Is there a way to show intent with regard to taking care of our minor children, or does my stepson now own this sizable amount of money?
-- Pam Pecuniary

a_v2.gifDear Pam,
I'm not an attorney, but I asked one to help me to reply to your questions. Connie Fontaine -- an associate professor of taxation and the Larry R. Pike chair in insurance and investments at The American College in Bryn Mawr, Pa. -- had these comments:

She needs to independently determine whether or not the trust was executed. If she completely trusts the stepson, she could rely on his word. But, as the mother and guardian of the deceased's minor children, she may have to contact the attorney who drafted it, the trust/bank that may have participated in funding it, etc. She may need to retain an attorney to accomplish these things. If there is no trust (because it wasn't executed) and there was no will, his property will pass by intestacy and the minors will receive value.

Also, state laws do not allow someone to completely disinherit minor children. She needs to determine how the state treats POD (or payable on death) accounts if minor children haven't been left enough/anything. The decedent created a trust but didn't leave a will? If she has to retain counsel, the wording of the unsigned trust could possibly be used to at least show intent.

Of course, it's always possible that if the children were essentially disinherited, the stepson could, if he would, disclaim a certain amount for the eventual benefit of his half-siblings. She can, as the mother and guardian, petition the probate court, if there even is a probate proceeding, to be kept in the loop.

Your letter paints a cautionary tale about the unintended consequences of people's actions in structuring their assets to avoid probate.

Avoiding probate shouldn't be the tail wagging the dog in estate planning. Getting the assets distributed according to the decedent's wishes is the goal and techniques used to avoid probate shouldn't conflict with that goal.

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