Put Your Affairs in Order

The phrase is from movies produced more than 50 years ago. The doctor gives the bad news to his patient, “There is nothing we can do for you. It’s time for you to put your affairs in order.” I was reminded of it when I started working recently on two different probate files. In both instances the male decedent knew he had a terminal diagnosis but failed to put his “affairs in order.”

These case histories will be semi-fictional because some legal issues are not yet resolve. Also to preserve the anonymity of the parties, I will refer to the first decedent as Aaron and the second as Benjamin.

Aaron had no children and had not been married before. He had been contending with a serious medical condition in recent years and only late last year learned that it was terminal. So he decided to marry the girlfriend with whom he had lived for the last few years. They married but despite that being a major life event, he did not revise the will that he had signed about five years earlier and in another state.

Not having an up-to-date will was only the most obvious of his mistakes. He owned a nice home with a mortgage. Through his employer he had some life insurance coverage. That life insurance would make those mortgage payments a lot easier. Therefore, changing the beneficiary to put his new wife down as a beneficiary was a no-brainer. He didn’t. After his death we discovered that he never processed the paperwork to change the beneficiary from his mother.

Assets such as life insurance and retirement accounts with beneficiary designations are not usually controlled by a will. For that reason I call them non-probate assets. Aaron was two for two in messing up his non-probate assets because he had an old girlfriend listed as the beneficiary on his retirement plan. His employer was a state government agency. Therefore the requirement under federal law that the spouse must consent to a non-spouse beneficiary designation could not apply to this retirement plan.

There still might be a happy ending for Aaron’s widow. If she is lucky, the old girlfriend will be generous and sign a disclaimer to renounce her rights as the primary beneficiary of the retirement account. Then, assuming the retirement account did not have a secondary beneficiary, his estate can receive that account and distribute it (after payment of income taxes) to his widow. Since Aaron had no children his only legal heir was his widow. Under Georgia law their marriage operated so as to “rewrite” his old will because her rights as the sole heir under the law of inheritance prevailed for everything except specific bequests (e.g. $5,000 to his older sister).

Benjamin’s situation was even more of a mess. He married late in life and had a fine young son who was nine-years old at the time of Benjamin’s death. He had a $100,000 life insurance policy. Unfortunately he never updated that policy and it had his mother as primary beneficiary. She did not have any fondness towards her daughter-in-law and took the death benefit. The principal assets of Benjamin’s estate were his residence with $200,000 of equity and a rental home that did not have a mortgage but is worth $150,000.

Benjamin never got around to consulting an attorney and preparing a will. Like many people he thought that making a will somehow made it more likely that he would die soon. Maybe he also thought that his wife would receive everything. Unfortunately, the law makes it complicated. His son is entitled to one-half of all assets titled in Benjamin’s name and his widow (and the mother of his son) gets the other half. The law of inheritance dictates that result when there is no will.

If the probate court decides to make it easier for the family, it will allow the widow to create an irrevocable trust for the benefit of their son which will receive about $175,000 from the net proceeds of the sale of the real estate. She will be the trustee of the trust and will be empowered by the court-approved terms of the trust to pay for her son’s private school tuition. The balance remaining when he attains 18 years of age must be distributed to him. We can only hope that by then he will have learned some good sense about money, or at least listen to his mother and not spend it all in one place.

Both Aaron and Benjamin left as their first legacy after death an absolute mess for their widows. Systematic estate planning would have avoided that. A well-drafted will and possibly a trust would have been a great start. Then updating beneficiary designations on non-probate accounts would have been a finishing touch. All that can be emotionally hard for someone with a terminal diagnosis. However to quote John Wayne from one of his movie roles, “Sometimes a man’s gotta do what a man’s gotta do."