My dad always said that wisdom is learning from other people’s mistakes – it’s cheaper than learning from your own mistakes. Here is a classic example to learn from: the estate of Estelle Elsa Manwell, from El Dorado County. Ms. Manwell was well to do – according to court documents she owned real estate in Contra Costa and El Dorado County worth $1,238,848. Ms. Manwell must have known that she did not have much time to live because she signed a handwritten will just days before she passed away. This handwritten, or “holographic” will left her estate to her 5 living children, but stated, “I do not want any of my property sold outside of my family for a minimum of 20 years.” The will also neglected to nominate an executor or mention whether the executor would be required to carry a bond. Ms. Manwell's will left a few problems for her children.
Because by statute the executor is paid the same as the attorney (though some may choose to waive this fee) the position can have an enviable financial bonus for an heir. For an estate of $1 million, the executor can collect $23,000. The court records indicate that the children of Ms. Manwell fought over who would be executor. This fight could have been avoided by simply naming the executor in the will. Now the family relationships will have to recover from what was said and done in a public (and expensive) forum.
The attorney’s fees and executor fees could have all been avoided by creating a trust, allowing the assets to pass to the heirs without going through probate. That amounts to nearly $50,000 in expenses, not to mention the months, and potentially years it will take for the court to process this hand-crafted document.
Tying beneficiaries hands
Sometimes restraining the beneficiaries is for their own good, and serves as a way of protecting them from creditors or their own foolish choices. But in this case, the children (likely all in their 40’s or older) will be forced to stay on title together on assets with which they can do nothing until 20 years later, minimum. These five children, who have just finished fighting over who will be the executor, will have to manage multiple properties in several counties – together. I have a feeling only the lawyers will appreciate this arrangement. Managing real estate can be time-consuming and costly. Managing with multiple owners with their own unique perspective, and potentially antagonistic attitudes towards each other is a recipe for waste. Sometimes a client has a sentimental attachment towards particular items, like a home wrapped with memories of family events, holidays, and birthdays. I try to remind clients that their children have their own fond memories, but also have their own lives to lead. Tying their hands and preventing them from making necessary decisions could ultimately hurt their children in the long run. Better to create a structure that will make it easy for the children to carry out your wishes, but gives them necessary options.
Haste makes waste
In summary, by leaving these planning decisions to the very last minute, Ms. Manwell left behind a situation that will cost her children financially and emotionally over a long period of time. All of these things could have been avoided by careful advanced planning.