You get what you pay for. Mr. & Mrs. Nelson learned this the hard way when Mrs. Nelson’s estate plan failed. Mr. & Mrs. Nelson married in 1981 – the second marriage for both of them. Both Mr. & Mrs. Nelson owned separate property from their prior marriages. Additionally, they each had children from their prior marriages.
California is a community property state. This means that property acquired during a marriage is owned by the marital “community.” That is, it is owned 50/50 by the spouses. By contrast, separate property is property that is owned or acquired prior to a marriage. Over the course of their decades long marriage, the Nelsons accumulated significant community property.
In the year 2000, Mrs. Nelson wanted to ensure that her separate property went to her natural born children when she died. She contacted an estate planning attorney to help draft an estate plan. She paid the attorney $600 to draft a trust to hold her separate property. But no attorney ever met with her in person. Instead, she met with the attorney’s assistant who helped her fill out a questionnaire. Later, she spoke with an attorney over the telephone.
The attorney’s office drafted three sets of documents for her to sign. She signed them. No attorney or legal assistant explained the documents to her. She died in 2016.
Mrs. Nelson’s Sons Discover a Fortunate Error
After Mrs. Nelson died, her sons took control of her separate property. Back in 2000, she placed her separate property into her trust through a transfer deed. But, when looking through the estate plan documents, her sons noticed an additional, unexpected estate planning document. They found a pour over will.
Generally, a pour over will is used to fund a trust if someone forgets or fails to transfer property into the trust. In this case, Mrs. Nelson’s pour over will instructed her trustees to put the “residue” of her estate into the trust. This meant that instead of her share of the community property going to her surviving husband, it would go to her sons (through the trust).
Her sons initiated probate proceedings asking the probate court to transfer half of the community property to the trust. Mr. Nelson objected, and filed another petition to reform the pour over will to reflect the terms of the trust.
The Court of Appeal Rewrites the Estate Plan
The probate court agreed with Mr. Nelson and found that the pour over will errantly included the community property. The sons appealed. On February 26, 2020, the court of appeal published its decision, which you can read, HERE. The court of appeal found “clear and convincing evidence” that Mrs. Nelson only intended her trust to dispose of her separate property. Therefore, the court of appeals rewrote the pour over will to make it only apply to separate property. This decision effectively cut off Mrs. Nelson’s sons from any share of their mother’s community property.
The court of appeal also wrote that the estate planning attorney should have at least discussed the disposition of her community property. They failed to do so, and as a result, the attorney drafted the pour over will improperly.
What Does This Mean?
This case is important for several reasons. First, it breaks with the general rule that courts do not look at extrinsic evidence to interpret of reform a document if it is unambiguous. In this case, the court of appeal reformed the will even though the will contained no ambiguity. Instead, the court of appeal ruled that even if a document is unambiguous, a court may rewrite it if there is clear and convincing evidence of a different intent.
Second, it underscores the importance of a proper estate plan. Mrs. Nelson did the right thing. She tried to avoid probate by putting her separate property into a trust. No one at the estate planning firm she hired asked her the right questions. So we do not know whether she wanted her sons to receive her share of the community property or not. Mrs. Nelson’s estate plan fell apart because her attorney was not careful. In the end, it cost her sons tens of thousands of dollars in legal fees and filing fees.
Third, some estate planning firms keep their costs down by having non-attorneys do the bulk of the work. While I do not know how the firm in this case works, $600 is fairly cheap for a trust. Therefore, I wonder if Mrs. Nelson had been willing to pay more, would an attorney have taken the time to sit down with her and explain the law and her estate plan to her. For me, this case underscores the necessity of picking the right estate planning attorney. Cheaper is not always better. Especially when a court can undo all of your planning.
I am not the cheapest estate planning attorney. I am not the most expensive estate planning attorney. But, I make sure I personally sit down with each client, understand their intent, and review the documents with them. I also make sure I am present at each and every trust signing, just in case I need to answer any last minute questions.
When it comes to estate planning, you get what you pay for. If you would like to learn more about the types of estate planning or the probate process you may be interested in some of our other articles.
Also, be sure to read our DISCLAIMER. This content is NOT intended to be legal advice.