life insurance

Caselaw Update: In re Estate of Stuart Alister Warner

Read the full opinion here.

Stuart Alister Warner died in 2013, leaving his relatively modest estate (around $150k in personal and real property) to his three child from his first marriage, and his second wife, who had first priority to be appointed Personal Representative of his estate. The three children and their step-mother did not get along. According to his children, Stuart did draft a will, but the children were unable to locate it in his gun safe, where he kept his important documents. The three children challenged the appointment of their step-mother as Personal Representative of their father’s estate, sought a declaration that their father did not die intestate (without a will), and sought to disallow their stepmother’s selection of spousal homestead and exempt property allowances. The children contended that their stepmother was an incurable alcoholic, and that her inventory failed to include several articles of personal property (guns, china, etc.) worth thousands of dollars.

The trial court denied the childrens’ petition and supervised the estate. The court reasoned that supervised administration would allay any concern the children had with their step-mother serving as personal representative. The court determined that since one of the children was incarcerated, and the two other children lived out-of-state, appointing the step-mother as personal representative made sense. Furthermore, since the step-mother was aided by an attorney, any concern about her alcohol problems could be alleviated with the help of an attorney. The court ordered that the issue of the missing will to be decided by a jury trial.

TAKEAWAY: Yet again, we see the importance of estate planning for blended families. With divorce rates hovering around 50% for the last few decades, and baby boomers getting remarried at older ages, blended families are very common, and a huge pitfall for estate planners. In this case, acrimony between the two factions of the family will likely deplete the entire estate, if it hasn’t already. Litigation, especially a jury trial, is expensive.

A little foresight could have prevented this mess. The stepmother, or the children, could have been provided for with life insurance proceeds from a policy maintained by the father. Alternatively, the father’s property could have passed to a trust that provided the step-mother with a lifetime right to reside on the real property, and a lifetime use of the income from the estate, or a percentage of income and principal, with the remainder passing to the children. In blended families, I almost always recommend a trust rather than a will, because not only can you avoid probate, but you can provide for two sets of beneficiaries without giving property outright. Once your property passes pursuant to a Will, there’s nothing your other heirs can do to get that property back. In this case, the second spouse could remarry, totally cutting off the children from the first marriage. Additionally, if the children’s contention about their step-mother’s alcoholism is correct, it’s likely the estate will be rapidly depleted. If a third party trustee was given discretion over distributions, that could be avoided. Additionally, the couple could have had a post-marital agreement not to take a spousal election, and to abide by the terms of the will or trust.

In addition, this case also serves as a reminder to estate planning attorneys of the importance of retaining client documents. If the children had a copy of the will from the drafting attorney, even if it’s not the original, it could be authenticated in court. Retaining hard copies of documents can be a liability for attorneys, but technology provides an easy and safer way to retain files. At my office, I retain encrypted files in the cloud, and periodically back up files to an external hard drive.

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