3 Probate Horror Stories

Speaker: Maritess Bott

Maritess:

Hello everyone. I am Maritess Bott, here for another one of our blogs—our monthly blogs—or podcast, I guess, whatever you want to call it.

I wanted to talk today about three probate horror stories that have happened or are happening in my office right now. I think it’s really good to learn about things that have gone wrong in real life in order to do the best for your family, do it right, plan ahead, and do the right thing.

Without further ado, I’m going to talk about three different things:

The first one is about an estranged mom on Medicaid.

The second is about an unmarried aunt who has lots of relatives outside of the country.

The third is about an almost ex-wife who ends up getting a share of the estate despite being an almost ex-wife.

Starting with the estranged mom on Medicaid:

We were contacted by a client whose mother is in a nursing home and is on Medicaid. The client is estranged from his mom. They haven’t talked in years and don’t really plan on talking to her. Unfortunately, he gets the phone call that his mom’s brother died. That’s his uncle. The uncle did not have a will, did not have any documents—no children, no surviving spouse.

So essentially, it would go based on intestate law. Intestate says it goes to your siblings in equal shares. Mom is the only sibling, so technically she’s the only person who gets this money.

What did the uncle die with? He died with a house worth three hundred thousand dollars and some cash worth another three hundred thousand. We’re talking six hundred thousand dollars—a lot of money.

My client really doesn’t want to talk to his mom, and his mom is really incapacitated. She’s on Medicaid, she’s in a nursing home, and we don’t really know much about her financial life or who’s taking care of those things. Unfortunately, we have to open the estate for the uncle. Now my client is the administrator, and we have to figure out a way to get these assets to the mom but still hope that she can stay on Medicaid.

That’s a tall order. There really is no magic way of doing it, so we’re still working through that.

My point in sharing this story is because if you have any family members who are single, have no children, and have assets, encourage them to do an estate plan. Encourage them to say—within a document, whether it’s a will or a trust—I want my assets to go here. Whether it’s to individuals or charities, it’s better to give to people that mean something to you versus just letting it go the natural way, which is to your siblings who happen to be alive—who probably don’t even know your current situation, as was the case here.

Otherwise, now you’re causing a lot of stress and drama and heartache to your nephew, who just wanted to do the right thing but now has to deal with a host of issues we need to resolve. That is a big challenge.

Now the second story is about another woman who was unmarried with no children. In her situation, she did prepare a will that said she wanted to benefit a couple of nieces and nephews who are part of her family.

The challenge with this particular estate plan is that when you have a will by itself and at least one hundred thousand dollars of assets, we still have to open what is called a probate estate. The probate estate is now something public. We file the will and then have to file a petition to open probate.

Part of this filing includes submitting what is called an affidavit of heirship. We have to tell the judge who this woman was naturally related to. In this case, the person who reached out to us is one of her sisters. They had nine brothers and sisters, and they’re all over the place. Several of them are in the Philippines, and they’ve lost touch with them. They don’t even know where they live, how many kids they have, or whether any of them are even still alive.

Because of that, we have to write in the affidavit: These are all the people we know of; these are the people we don’t know of. We would just put “address unknown” or “whereabouts unknown.” If we do know where they are, we have to send formal notice in order to open the estate.

Even though this woman did create a will, which is a good starting point, it was not a good thing to have a will by itself. Now we have to send notice and make sure all these people know about the estate. We also have to publish in a newspaper, in case someone comes out of the woodwork and tries to qualify themselves or claim they are one of the beneficiaries.

We have to watch out for that too. Again, another person who was single and had no kids—creating a will is great as a beginning stage, but your best bet is creating a trust. That way, we don’t have to open the probate estate and notify all these random people in another country or try to track them down.

The third story is another estate, and this one actually started about a year and a half ago. A daughter calls me saying her dad died. Her dad was already on a second—or maybe third—marriage. She tells me they were pretty much almost done with the divorce. They had gone through the proceedings and were just about to finalize it when he died.

The daughter tells me in our first meeting that she’s in touch with the soon-to-be ex-wife, and that the wife is amicable and says, “Yeah, it’ll go to you, the daughter. I know we’re getting divorced.”

Well, lo and behold, we find out where all the assets are held, who is listed on title, and what we find is that the beneficiaries were never changed. On some retirement accounts and life insurance policies, the wife was still listed as the beneficiary.

In the state of Illinois, whoever is listed as the beneficiary is going to receive the funds—regardless of whether there’s a divorce pending, or even if the divorce was finalized. The funds still go to that soon-to-be ex-wife, not to the daughter. The total of these assets was somewhere between two and three hundred thousand dollars, which is a lot.

The daughter was upset that she couldn’t do anything about it. We opened the probate estate and found that there was a house—but it was highly mortgaged, and the actual equity was not even enough. It might even be upside down. Now we have to figure out how to sell it via short sale.

The worst part of this scenario is that my client—the daughter—has been having challenges with the second or third spouse of her dad. They’re trying to get personal items out of the house, making sure they’re properly inventoried and sold so that there is some money for final expenses and to keep the house going. There are certainly a lot of carrying costs when it comes to a house.

The moral of the story is: when you’re going through a divorce—and I know this is a hard one—finalize it sooner rather than later. If you unexpectedly die during that divorce proceeding, you might have unintended consequences as to where your money goes.

I’m sure that the father—the decedent—wanted that money to go to his daughter, not his ex-wife. That’s lesson number one.

Lesson number two: just have an estate plan. Had the dad created something that said, “Everything I own goes to my daughter at this point,” and made sure that the wife’s name wasn’t on the accounts as a beneficiary—if he had created a trust that named the trust as the beneficiary and the trust passed everything to his daughter and grandchildren—then there would have been no probate. It would have been private. We would not have had to deal with the wife, and it would have gone to the people the father really wanted it to go to.

Again, another big lesson learned. In all three situations, the individuals have already died. There’s nothing we can do about it now. We are just doing what we can to administer the estate.

But in the long run, I tell families all the time: these are the stories you need to learn from. Doing nothing is the worst option. Doing an incomplete estate plan is a bit better, but typically not a good option. The best option is to do an estate plan that is complete, so we can avoid probate and make sure all your instructions are laid out and given to your family, so they can follow them.

That is it. Hopefully that was something you can learn from. If you have any questions on this topic, you certainly can call us here at Bott & Associates.

We hope you have a great day.