Avoidable Litigation as a Threat to the Assets of An Estate
by Carol Warnick
It wasn’t that long ago when the real threat to the financial well-being of a person’s estate was death taxes. People were concerned about losing close to 50% of their estate to taxes without proper planning. But with the increased exemption amounts, death taxes are not a big issue in most cases. But something else is taking its toll on the hope of a smooth and simple passing of assets at death, and that is litigation.
Much of the current estate litigation relates to family disputes, some of which might have been avoided through better estate planning. But a certain amount of these family disputes would have occurred anyway simply because the families were upset enough to litigate over anything once mom and dad have passed away. There is a different type of litigation beginning to crop up, however, that may create just as many problems for an estate as family in-fighting, and one which can be totally prevented. I am speaking of litigation over wills and trusts drafted with forms obtained over the internet.
Unfortunately, with the increased exemption amounts (currently $5.43 million per person) and since many people no longer need tax planning they are more apt to decide they can do their estate planning documents themselves and not involve an attorney. While self-drafted wills are not new and have been creating estate administration problems for years, I believe that the current ease of finding forms on the internet, making a few changes, and printing them at home will likely make this a more significant problem in the future.
Cases are starting to crop up regarding mistakes made by consumers using internet forms. One Florida case is a good example. The case is Aldrich v. Basile, 136 So. 3rd, 530 (Fla. 2014). In this case, Ms. Aldrich used a form and listed all the assets she owned at the time (her home and its contents, an IRA, a car and some bank accounts) and stated they should go to her sister. If her sister didn’t survive her, she listed her brother as the one to receive everything.
As luck would have it, her sister predeceased her and left her some additional assets which weren’t listed in Ms. Aldrich’s will because she didn’t own them when she drafted her will. Either because the internet form didn’t contain one or because Ms. Aldrich took it out when she printed the will because she thought all her assets were covered, there was no residuary clause in the will. As a result, after a trial court decision, an appellate court reversal, and ultimately an appeal to the Florida Supreme Court, it was decided that the listed assets would go per the will but the after-acquired assets inherited from her sister would pass through intestacy, bringing in two nieces who were the daughters of Ms. Aldrich’s deceased brother to share in the estate.
Although the living brother offered a note left by Ms. Aldrich and other extrinsic evidence that Ms. Aldrich intended all of her assets to go to him, the court refused to consider them because of the “four corners” doctrine. There was no ambiguity within the four corners of the will, therefore no extrinsic evidence was admitted.
It is easy to see how Ms. Aldrich could have simply deleted the residuary clause thinking she didn’t need it, but it is very unlikely that a competent lawyer drafting a will would make that mistake. If the lawyer had made the mistake, there would potentially have been recourse through the lawyer’s malpractice insurance. It seems that the ease of which will and trust forms are now available on the internet and the fact that many people don’t need a lawyer’s expertise for tax planning under current law will combine to create many more of these problems. Such problems lead to costly litigation with really no recourse for the families of those “do-it-yourselfers.”
Several states have looked at the issue of whether or not legal form providers are violating unauthorized practice of law statutes, but the cases are by no means consistently decided. While such issues are being sorted out, the old adage “buyer beware” certainly applies with regard to do-it-yourself wills and trusts.
A concurring opinion in the Florida case summed it up as follows:
Obviously, the cost of drafting a will through the use of a pre-printed form is likely substantially lower than the cost of hiring a knowledgeable lawyer. However, as illustrated by this case, the ultimate cost of utilizing such a form to draft one’s will has the potential to far surpass the cost of hiring a lawyer at the outset. In a case such as this, which involved a substantial sum of money, the time, effort, and expense of extensive litigation undertaken in order to prove a testator’s true intent after the testator’s death can necessitate the expenditure of much more substantial amounts in attorney’s fees than was avoided during the testator’s life by the use of a pre-printed form1.
1Aldrich v. Basile, 136 So. 3rd 530, 538 (Fla. 2014).