Here is yet another example of why you should review your will and other estate planning documents at least every five years.
The facts date back 70 years, when a mother and father created a written trust for each of their four sons. Each trust was set to terminate when the particular son turned 30 years old.
Several years later, one of their sons, Bart, married. Shortly after Bart’s wife gave birth to his daughter, Peggy, Bart and his wife divorced. A year later, Bart signed a will that left the “rest and residue” of his estate to his brothers’ existing trusts.
When Trusts Terminate but Wills Do Not
Time marched on. Each brother eventually turned 30, and, accordingly, that brother’s trust lapsed under its own terms. Yet Bart never changed his will.
More time passed – decades, in fact–, and then Bart died. Despite their respective trusts having lapsed, Bart’s brothers claimed they were entitled to Bart’s estate under his will. Everything appeared to be going according to plan, but then something unexpected happened.
Bart’s only child, Peggy, showed up and claimed that she should inherit Bart’s property.
Lapsed Trust and the Residuary Clause
Peggy argued that the brothers’ trusts could not be beneficiaries under Bart’s will because those trusts no longer existed. That left the residuary clause without a beneficiary, which meant theentire clause failed.
Under Texas law, when a will is without an effective residuary clause, the remainder of the estate goes to the decedent’s heirs at law.
The Court agreed with Peggy. BecausePeggy was Bart’s only heir-at-law, she inherited the remainder of his estate.
A Quirk in Texas Estate Planning Law
This case highlights an interesting quirk in Texas law. Bart could have left his estate to a trust that was not in existence at the time he wrote his will, and that would have been effective in transferring his estate to any newly created trusts that benefited his brothers.
However, Bart had specifically identified the three existing trusts created for his brothers.. Because those specific trusts had expired long before Bart’s death, and because the will made it clear that Bart intended his estate to go only to those specific trusts, the court could not redirect the bequest.
As a result, the trusts could not serve as beneficiaries of Bart’s estate.
The Importance of Updating Your Will and What to Keep in Mind
Could Bart have fixed this problem during his lifetime? Of course. He simply needed to review and update his will, especially after his brothers started turning 30 and their trust terminated.
Bart’s case offers several important estate planning lessons.
Obtain Necessary Documents
First, if you plan to leave a bequest to an entity such as a trust that you do not control, you should obtain a copy of that entity’s governing document. Reviewing it with your attorney allows you to understand its terms and draft your will accordingly.
Include Contingency Language
Second, your will should include contingency language that addresses what happens if a beneficiary entity no longer exists at the time of death.
Review Your Estate Plan
Third, you should meet with your attorney at least every five years to go over your estate planning documents and update them if necessary. You should also review your plan if any of the following occur:
- A beneficiary dies, becomes disabled, or lapses
- Your estate or marital status changes
- Your health or medical diagnosis has changed significantly
- You have adopted a child
- An agent dies or is no longer appropriate
- You acquire property in another state
- You move to Texas from another state
- There is a relevant change in the law
Avoiding Turning Your Estate Plan into a Teachable Moment
The final lesson is simple: do everything possible to ensure your estate planning does not turn into a teachable moment for your family.
Regular reviews and thoughtful updates can help ensure your intentions are carried out as planned.
Hammerle Morris is Here to Help Keep Your Estate Plan Up-to-Date
Bart’s story shows how easily an estate plan can become outdated as life changes. Regular reviews and clear planning help ensure your intentions are carried out as planned. At Hammerle Morris Law Firm, we help clients keep estate plans current and effective. Schedule a consultation to protect your intentions and your legacy.
Virginia Hammerle is an accredited estate planner and represents clients in estate planning, probate, guardianship, and contested litigation. She may be reached at legaltalktexas@hammerle.com. This blog contains general information only and does not constitute legal advice.
