Estate Planning: When Is It Too Late?

It's too late for estate planning when it is too late.

When is it too late? 

Here are three recent real-life examples.

Mom Dying in Hospital. We got a call from a son telling us his mom was in the hospital and that she may only have a week to live. Her assets include a house in San Francisco, a brokerage account, and a bank account. Estimated estate value $4,000,000. She has two children and a mean husband she separated from ten years ago. The husband is not the father of her children. She has no will, living trust, or durable power of attorney.

Because she has no will or trust, she will die "intestate," which means her estate will be distributed according to the probate code. In her case, up to one-half of her estate will go to the mean husband she separated from ten years ago and the other half to her two sons.

We had to tell her son there was nothing we could do. It's too late.

She is no longer competent and doesn't have a durable power of attorney, which could have given her son the authority to create a living trust for her and transfer her assets to the trust. Instead, her estate will go through probate, and the court will order a significant portion of her estate to her estranged husband. This is a nightmare result for her and her sons.

Dad Incompetent. We received a call from a daughter telling us her dad was diagnosed with severe dementia. She said she needed access to his bank and investment accounts to pay his bills and manage his finances. He did not have a living trust or a durable power of attorney.

If her dad had a durable power of attorney and she was named his agent, she would have the authority to access his accounts and care for him. But he didn't, and he is no longer competent enough to sign one.

It's too late for him to get a durable power of attorney.

Her solution is to petition the court to appoint her as her dad's conservator. A conservatorship is often described as a living probate. It is complicated and expensive. 

She told us her dad knew he needed to do his estate planning, and she had talked to him about it many times while he was still competent, but he thought it would be too complicated. Now, she will have to go through a complicated conservatorship because he didn't take the time to prepare a durable power of attorney.

Parents Die with an Unfunded Living Trust. We received a call from a son whose parents just died with a living trust. However, his parents failed to transfer title of their two homes to their living trust. A living trust can avoid probate only if the probatable assets (such as real estate) have been transferred to the living trust. 

If there is a writing indicating the parents' intent to transfer their homes to their trust, an attorney can file a Heggstad petition to ask the court to order the properties into the trust. Courts tend to be liberal in granting Heggstad petitions because the courts would rather not clog up their dockets with probate cases. However, there must be a writing to show intent. Usually, this is done with a Trust Schedule. A Trust Schedule is an attachment to the living trust which lists the assets the grantors intend to transfer to the trust.

In this case, the parents had a DIY or very poorly written attorney-drafted living trust that included a Trust Schedule, but the Schedule was blank, and there were no other documents indicating the parent's intent to transfer the properties to their trust.

Because the two homes had not been transferred to their trust and because there was no writing indicating the parent's intent to transfer the homes to their trust, the estate will have to go through an expensive probate.

Don't wait until it's too late to do your estate planning. And if you can, make sure your parents have done their estate planning because when it's too late, it's too late.