Drifting In A Sea Of Uncertainty

A gentleman came to our office with some documents in hand and said, “Where do I stand?” He had been struggling for several years trying to understand a stack of legal documents which he acquired when his father died, but which were never explained to him. We will call the gentleman who came to our office, Tom. Tom’s father, whom we will call Dad, was a successful businessperson. He had acquired substantial assets and was married with three children, one of whom was Tom.

Dad created a trust at the height of his career and provided that, upon his death, assets would be distributed in annual increments to his “spouse” and his “children.” The trust document used did not include a provision to identify his spouse or children by name. Dad told Tom about the trust document. A few years later, Dad prepared a Last Will. The Will was written after Tom’s mother had died and after Dad had remarried. It provided that Dad’s second wife (who was named) would receive certain income during her lifetime and that certain provisions would be made for Dad’s three sons. 

Tom’s stepmother was a private person, and after Dad died, she assured Tom that all of Dad’s affairs were in order at the time of his death and that upon her death, Tom and his brothers would receive everything that they were entitled to receive, whatever that meant. Several years passed. During those years, Tom’s brothers fell on hard times. The brothers eventually contacted Tom and asked when they would ever receive their share of Dad’s estate since he had by then been long dead. Apparently Dad had told them before his death that Tom was his trustee. 

Eventually, Tom came to our office with Dad’s trust document and Dad’s Last Will in hand. He asked the simple question, “Where do I stand?” Although the question was simple, the answer was not. During our discussion, we explained to Tom that, at the time of Dad’s death, he became the trust’s trustee under its terms and had the authority to review Dad’s financial matters and determine which assets should be placed in the trust. He could then have funded the trust with the assets that should have been placed in the trust according to its provisions. 

We further explained that the provisions of the Last Will were not drafted with the contemplation of first accomplishing the full funding of Dad’s trust – the Last Will did not even make mention of the trust. Tom was absolutely shocked. To avoid such situations, when we prepare a probate avoidance trust for our client, we explain exactly how each financial account, parcel of land, and titled asset (such as a vehicle or a boat) should be retitled so the trust holds the asset during our client’s lifetime.  In this way, our client retains full control over the asset during their lifetime, but the trust is fully funded for the next family member designated to act as trustee after our client’s death or disability. 

In addition, we always prepare a “pour-over” will, which is used to collect any assets of our client that were not placed into the trust during our client’s lifetime and then cause those assets to be placed into the trust upon our client’s death. After we work with our client to transfer the client’s assets into the trust, we meet separately with the family member(s) designated as the successor trustee(s) so they know how to manage the trust and carry out their duties without confusion or delay. 

In Tom’s case, no one explained to Dad how to fund the trust, and Dad never did so.  No one explained to Tom how the trust was designed to operate. Likewise, no pour-over will was prepared, and the Last Will, prepared years later, did not coordinate with the trust’s provisions. Because of this lack of explanation, Dad’s estate planning documents did not accomplish his goal. Tom later discovered that assets that should have been placed in Dad’s trust were not. Those assets would have benefited Tom and his brothers upon Dad’s death. After Dad’s death, Tom’s stepmother, presumably in complete good faith, took assets that should have been in Dad’s trust and used them for her benefit, and through her own estate planning, designated at least some of them to be distributed to her son from her first marriage. 

We talk to our clients. We give our clients homework assignments to fund their trusts. We explain how the trusts work to our clients’ successor trustees.  We remove the uncertainty, and our clients enjoy protection and peace of mind. It’s better that way. To schedule a consultation in our Collierville, TN office, call us at (901) 853-3500, or visit coxelderlaw.com for more information.