This is the story of a man named Herbert who made one crucial mistake in his estate planning.1 Although Herbert is the main character of the story, it is his surviving family members who are left to clean up the mess.
POWER POINTS
+ Loose ends and unclear provisions in your estate planning documents are the best ways for your loved ones to end up in court.
+ Your estate plan should reflect your current wishes as well as contingencies for changes in circumstances.
+ Your relationship with your estate planning attorney should be ongoing.
Herbert’s Estate
Herbert was a wealthy, 52-year old man with an extensive estate plan and a long-time estate planning attorney. In 1955, eight months after his second divorce, he met Phyllis, a 23-year old New York showgirl, whom he married soon thereafter. Herbert and Phyllis’s marriage lasted two years, ending in divorce. Herbert and Phyllis did not have any children together, but Herbert did have children and grandchildren from his previous relationships.
Pursuant to their divorce agreement, Herbert was required to establish an irrevocable trust with income to be paid to Phyllis for her life and then to her mother. Herbert chose to let his divorce attorney prepare the irrevocable trust document rather than his estate planning attorney. The trust stated, in part:
Upon the death of both Phyllis and her mother, the Trust Estate shall be distributed in equal shares to those who are then living of the Settlor’s grandchildren, namely: William and Robert, and Susan and Oliver, provided, however, that if any of such grandchildren are then deceased leaving one or more descendants then living, the share which such deceased grandchild would have received if then living shall be distributed to his or her then living descendants, per stirpes.
At the time the trust was executed, the individuals named were Herbert’s only living grandchildren.
Herbert died in 1993. Phyllis died in 2011 and her mother had predeceased her, so it was up to Bank of America, as trustee, to distribute the remaining $1.6 million to Herbert’s grandchildren. The issue because whether the trust assets would be divided amongst the four grandchildren named in the trust or amongst all fifteen of Herbert’s then living grandchildren. Unfortunately, since Herbert was no longer around to clarify his intent, the trust document and surrounding facts would have to be deciphered in court to determine who would inherit the remainder of the trust.
Court’s Decision
On November 22, 2013, the Circuit Court of Cook County determined that based on the trust language, Herbert’s intention was clear—he intended for the trust estate to pass only to the named grandchildren. The after-born grandchildren appealed the decision.
On January 26, 2015, the Illinois Appellate Court disagreed with the trial court and determined that an ambiguity did exist in the trust language. Therefore, the matter was remanded to the trial court for further litigation. Although the court stipulated that a “natural class” among the beneficiaries typically indicates a class gift, the court held that additional factors must be considered, including (a) the relation of the testator (Herbert) to the objects of his bounty, (b) the subject matter of the gift and (c) the skill of the draftsman who drafted the document.
Regarding factor (c), the court found that “the draftsman here was the settlor’s divorce attorney rather than his long-standing estate planning law firm, indicating a likely oversight in failing to include the possibility of the after-born grandchildren.” Needless to say, the time, cost and strained relationships of this ongoing litigation is taking an unnecessary toll on Herbert’s family.
How to Avoid Herbert’s Predicament
Estate planning is not the place to take a shortcut. The purpose of a proper estate plan is not only to reflect your current wishes for yourself, your loved ones and your assets, but also to provide for unexpected contingencies. Situations may appear to be simple, but circumstances change and if contingencies are not addressed, your assets and your loved ones are likely to end up in court. Additionally, if you are the one who stands to inherit from someone, such as a parent, it would benefit you to ensure that your parent or parents have a proper estate plan in place so that unnecessary litigation can be avoided.
The most efficient way to achieve these goals is to make sure that the estate planning attorney that you choose to work with understands your circumstances and your wishes. It is also important to have an ongoing, open conversation with your attorney so that if there is a significant change in your family or financial situation, you are comfortable revisiting your estate planning to ensure that it reflects your wishes accurately.2
1. Bank of America, N.A. v. Judevine, 2015 IL App (1st) 140532 (January 26, 2015) Cook Co., 1st Div.
2. For a detailed explanation of when to revisit your estate planning documents, please see “Reviewing Your Existing Estate Planning Documents” in the October 2010 Newsletter.