Two words that can unintentionally disinherit your kids.
I’m Michael Jenkins and as an estate planning attorney in San Diego, I wanted to do a video that highlights how nuanced estate planning can be and how two simple words can completely flip your intent on its head.
We have a client we were working with who wanted to leave her house to her partner and her life savings, which was about $500,000, to her daughter and that was all she had. That was her entire estate. Her house, which had about a $500,000 mortgage on it. She wanted it to go to her partner, cash to her daughter and she was certain that her partner would be able to refinance and take over the mortgage and wasn’t concerned about that.
She had a trust setup. It was a DIY or low cost plan that she had done on her own and she wanted us to review it to make sure it said what she wanted it to say. When we were reviewing the documents, we saw two words that completely flipped everything on their head that was “free of”. Her plan, the way that it was said when she passes away, she wanted to pass the house to her partner, free of encumbrances. That means if she passes, we’re going to use the $500,000 in life savings to pay off the mortgage and then pass the house to her partner so her partner gets a paid off house and her daughter has nothing.
Now, she was absolutely mortified, of course, because that is not what she wanted. She wanted to make sure the house and the mortgage went to the partner and the cash went to her daughter. The more appropriate words for that would be “subject to” not “free of”.
Now of course we got this fixed for her and we completely avoided that disaster, but it really highlights how important it is to get your estate plan set up with someone who pays attention to the details, understands what they mean, and is able to do a good job in the right way the first time.
Now, if you have any questions about estate planning or want to make sure that an existing plan still says what you wanted to say, always feel free to give us a call, send us an email, send us a text, we’re here and we’re always happy to help.