Question

A 58-year-old widow has three children, ages 21, 25 and 35. The 35-year-old is married with three children, ages 2, 5 and 9, the widow's grandchildren. She owns a home worth about $500,000 and title is in her name. She has investment real estate worth about $300,000 that is held in joint tenancy with right of survivorship with her oldest child who understands that this is really the mother's but is held in joint tenancy only to avoid probate. He has agreed to share the property with the other children when she dies. She has a savings account of $150,000 with the grandchildren as equal beneficiaries at her death. She now comes to you for estate planning counseling. She has never done any estate planning before. She loves her children and wants to treat them equally but is concerned about the middle child who has had substance abuse problems in the past and has shown himself to be financially irresponsible. What kind of basic estate plan would you recommend for her? What would you tell her to motivate her to act on your advice?

Answer 1

In the given quesiton, Mrs. A has come to us for esate planning. Estate planning is the preparation of tasks that serve to manage an individual's asset base in the event of their incapacitation or death. The planning includes the bequest of assets to heirs and the settlement of estate taxes. Most estate plans are set up with the help of an attorney experienced in estate law.

In the given situation, we can find that the lady has an own home worth $500,000, a real estate property worth $ 300,000 and a savings deposit worth $ 150,000. As given in the question, the savings deposit has already named her kids as beneficieries and each of them will be getting equal share at the time of her death or on she becoming incapable in future. This treatment is absolutely favourable for the kids as each would be getting an equal share at the time of her demise. But, since this is the asset owned by her and has the least value, the same would be better to be given totally to the middly kid. Because, if he is totally irresponsiblee in dealing with money, giving him a higher valur of money would be a bad decision as he would be spending it unnecessarily for his own needs. Hence, I would request a change in treatment of her savings account sharing. ie; it could be named in her middly son's name and could be kept a condition that it could be withdrawn only after a fixed number of year. (say 20 years). In that case, the same deposit would grow with interest and become a good sum of money in future.

The next main asset will be her real estate property which has a value of $ 300,000 on the present date. As we know, when a single property is being shared between all the kids, there are obvious chances of having fights between them regarding the same stating that one person got a better place and other got a bad area of the land. Hence, it would be better for them to give it completely to a single person. And as there are no information about the youngest kid, the same could be given to the youngest child. This estate property could be given to youngest child and he/ she shall decide on what to be done with it in the future.

Finally, the house prooperty of hers, which has a value of $500,000 shall be written in the name of her eldest son and his 3 kids. It shall be written in the name of all of them jointly and giving power to the eldest son to decide about in duture.

Hence, the final will could be written as follows:

House worth $ 500,000 for eldest son and his 3 kids

Estate property worth $ 300,000 for the youngest child

Savings balance of $ 150,000 for the middle child.