In a perfect world, assets would always be distributed to the proper beneficiaries and legacies secured. Unfortunately, poorly structured documents—or no planning—can unintentionally disinherit loved ones and rip families apart. Nikki Hatton, an estate planning attorney at Schwabe, Williamson & Wyatt in Portland, has dealt with the aftermath of poor estate planning too many times. “One person hand-wrote their will because they saw on television that a handwritten will is legal,” Hatton recalls. “It is legal in California, but not in Oregon … the law is different in every state.” In this case, the Oregon do-it-yourselfer inadvertently disinherited several beneficiaries.
Darin Christensen, a Portland-based tax and estate planning attorney at Bullivant Houser Bailey, recalls one self-prepared will that was not notarized, so the witnesses had to be located. It left various accounts to certain beneficiaries, with “residual assets” to another. Many of the accounts had closed, so most went to the “residual” beneficiary. Christensen says an unintended beneficiary seldom shares. “It’s much more typical for people to just say, ‘Tough luck.’”
Other situations also require careful planning. “In my experience, in almost all cases in a blended marriage, after the death of the first spouse, the surviving spouse has no reluctance cutting out the children of the first-to-die spouse,” Christensen says.
Family dynamics can be damaged by an estate plan. Eden Rose Brown, an estate planning attorney with offices in Salem and Bend, is a proponent of family communication. “I’m dealing with a case now where the parents gave money unequally, which is their right to do, but they didn’t discuss it with their children. … As a result, the sister wanted to sue the brother. The way this estate plan was drafted, it created bitterness and anger.”
Brown advises most people to create living trusts, which avoid probate and provide more options, she says. Unfortunately, many people use cookie-cutter living-trust forms or do not keep their trusts updated.
“One of the top 10 mistakes we see is perfectly drafted trusts that [the owner] failed to fund; then the estate goes to probate to get the assets from the estate into the trust, which totally defeats one of the purposes of the estate plan,” says Patrick Green, an estate planning attorney at Davis Wright Tremaine’s Portland office.
Brown warns against giving substantial assets directly to children. Lifetime trusts protect assets from “creditors and predators.” Brown has seen divorce, bankruptcy, lawsuits or substance-abuse issues wipe out an unprotected inheritance. A lifetime trust also provides an opportunity for value-based giving, such as funding education, or withholding financing for self-destructive habits.