August , 2019

Who gets the House?

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Who Gets the House?
Why everyone needs to pay attention to Estate Planning.

After almost a half century as an estate planning attorney, I’ve too often heard clients state that they have a “simple estate” and didn’t really need any planning.

Too often the public limits the need – or perceived lack of need – only to executing a Will or Trust, and overlooks crucial matters of titles to property and properly executed beneficiary designations.

A recent estate plan I drafted involved a middle aged married couple. The clients had consulted my firm on another matter and told us that estate planning wasn’t a concern. This was the husband’s first marriage and he hadn’t any children. The wife had been previously married with two adult children. The clients lived together in the home which was awarded to the wife, in her sole name, at the time of her divorce. Aside from the home, the wife’s 401k and husband’s IRA made up most of their wealth. Matters were so “simple” that neither, after over 10 years of marriage, felt the need to ever execute a Will, nor had the couple felt the need to spend the legal fees and County Recorders costs which would have been charged to retitle the home. After all, if her husband died she would just keep living in her home, and if the wife died, her husband BELIEVED the house would then pass to him as the surviving spouse. That’s the way it works – the surviving spouse gets everything. Right?

Imagine the shock the husband expressed when I informed them that under the State Intestate Statute (the law governing disposition of a decedent’s estate in the absence of a Will) where the person passes, without a Will, and with a spouse and children born of a prior marriage, one half the probate estate went to the spouse and the remainder to the children.

Now it was apparent that if the wife were to pass first, that house would belong half to children who were not related to him. He would be faced with needing to either be able to negotiate a purchase of the home in which he had been living since he was married from his deceased wife’s children, or being forced to see the house sold, and using his share of the proceeds (after real estate sales commissions and real estate transfer taxes plus related sales costs) to purchase a new residence or else being faced with renting an apartment in his senior years.

Could this scenario be avoided? Yes. Either through provisions in a Will, or by a Deed transferring the home. Can the wife be sure that her children are protected and eventually receive the full value of the residence? Of course, and a competent attorney could guide them through the process.

It seems that estate planning, far from not being a matter of concern matter became the immediate focus of their attention.

A skilled estate planning attorney will see matters of critical importance that never entered your thoughts. You assumed that no problems are present with your estate plan (or lack of plan).

At the age of 21, I entered law school. I earned the funds for tuition by working part time as an agent for a major life insurance company. Soon after passing the state insurance broker’s licensing exam I did an audit of my own family’s life insurance. That audit was of the one and only policy on my father’s life which he had taken out shortly after WWII and before having ever met my mother. The beneficiary named on the policy was his mother, my grandmother. Now married for 23 years, my parents never once had the thought that they needed to contact an agent from that company to ask about updating the beneficiary designation. While I was a young child my father had suffered a serious heart attack and nearly died. Had that happened, the proceeds would not have been paid to my mother to help care for herself and two young sons, but would have been paid to her mother-in-law, with whom there were strained relations.

In all these years that have followed I have seen this basic mistake repeated many times. Upon marriage the beneficiary designation is often left to a parent or – worse yet – to a former spouse. Aside from the family home, life insurance proceeds are often the most valuable asset in the decedent’s estate. These are critical matters and though clients often rate estate planning as a low (or no) priority, a correct estate plan often far outweighs other matters in the comprehensive financial planning process. We need to review all beneficiary designations, especially your IRA and 401k plans.

We at Rabinovich Sokolov Law Group urge you to take inventory of your finances and estate planning documents. For a comprehensive analysis of your position please come see us for a comprehensive estate evaluation.

© Alan Jay Ackerman, Esquire
Rabinovich Sokolov Law Group
1700 Market Street
Suite 1005
Philadelphia PA 19103
(215) 717-2200
alan@rslawgroup.com

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