Maintain flexibility . . . and review your estate plan documents!

Our estate planning attorney feels very confident about his ability to structure documents that will take care of all contingencies into the future. And so, when he drafted our original documents 10 years ago, he included a number of elements that are characterized as “irrevocable.” Sadly, neither Sarita nor I had any idea what these documents would mean.

Oh, we understood their intent. But since our attorney was so convinced (and convincing!) that irrevocability made our assets much safer than if we created more flexible structures; and because he didn’t ask us the kinds of questions I am learning to ask now; and since our wealth was very much less than it is today . . . we could not imagine the decisions we were making at that time might have the kinds of dramatic implications they might now (supposing our investments’ values were to grow at even a few percentage per year for the next two, three, or four decades or more). But now, we are told, there is little, if anything, we can do to reverse the decisions we made 10 years ago.

I was talking with our investment advisor a while ago, and he said he reviews his documents twice a year with his attorney. He discusses any changes in his and his family’s life situation at each meeting, then, once a year, directs his attorney to make any necessary changes.

Such an arrangement, clearly, will increase current attorney’s fees, but the more I study this field, the more I realize such investments are probably very wise! It is truly impossible, even for the smartest attorney, to make plans that will cover all contingencies.

A recent North Dakota Supreme Court decision, In re Estate of Samuelson, 757 N.W.2d 44 (N.D. 2008), demonstrates the truth of this concept once more. Recounting the history of the case, the Supreme Court notes,

Ernest Samuelson executed his Last Will and Testament in 1993. Paragraph IV stated: “I give, devise, and bequeath all the rest, residue and remainder of my estate to my mother, Hulda Samuelson.” Paragraph V provided: “I have intentionally failed to provide for my half sister, Eleanor West.”

Problem: Mr. Samuelson’s mother died sometime before he did (in 2005) and he never made provisions for that situation.

Now, Hulda Samuelson had been born to the Ljunggrens. Her maiden name was Hulda Ljunggren. Upon her death, the Ljunggren family, presumably as per her will, became her heirs. So when Ernest died, the Ljunggrens asserted that, as Hulda’s heirs, since she had been named heir of Ernest’s estate, they were entitled to the residue of Ernest’s estate.

But . . . not so fast! The two granddaughters of Ernest’s half-sister showed up in 2007 and claimed that, while Ernest had obviously and intentionally excluded Eleanor from his will, he had made no provision to exclude any of her progeny.

Moreover, since Mr. Samuelson never married and did not have children; and since his mother, father, and half sister had all predeceased him; they, the granddaughters of his half sister, were his rightful heirs . . . even if he had never met them, never known them, never cared about them . . . or they him.

The district court determined . . . that Ernest Samuelson’s will did not effectively distribute the residue of his estate; [and] therefore, intestate succession governed the balance of his estate. The district court . . . held [Samuelson's will] did not exclude Amanda West and Robin West individually, or as a class; it only excluded Eleanor West. The district court ordered Amanda West and Robin West were the only descendants of the decedent’s parents; therefore, they inherited the intestate estate of Ernest Samuelson.

The Ljunggren family, of course, protested.

[I]t would be unreasonable to conclude Ernest Samuelson intended his property to be distributed to Amanda West and Robin West, because they were strangers to him[, the Ljunggrens said]. They argue[d] it can be implied that, by excluding Eleanor West, Ernest Samuelson also intended to exclude her heirs, because it can be inferred Ernest Samuelson did not know Eleanor West had heirs.

They assert[ed] Ernest Samuelson did not know Amanda West and Robin West existed; therefore, the exclusion of Eleanor West should be a class exclusion of Eleanor West and her heirs.

And the conclusion of the Court?

Even assuming an inference could be made from extrinsic evidence that Ernest Samuelson did not know Amanda West and Robin West, such an inference would be irrelevant. Extrinsic evidence can only be admitted “to show what the testator meant by what he said, not to show what he intended to say.

And so, finally,

We have considered the Ljunggren family’s . . . arguments, and we conclude they are without merit. The district court order, determining the remainder of Ernest Samuelson’s estate is governed by the laws of intestate succession and that Amanda West and Robin West are entitled to the remainder of Ernest Samuelson’s estate, is affirmed.

Lessons:

Review your estate plan regularly (at least once every couple of years) and revise it as circumstances change!
Assume nothing.
Be crystal clear in all your wishes.
As many attorneys will recommend: perhaps you want to use a trust instrument as your primary estate planning document–a trust you put under control of a trustee who knows you and with whom you have a trusting relationship (rather than relying upon the decisions of a probate judge whom you do not know and who knows nothing about you).*

* I should note that while there are dangers in trusting the judgment of people who know nothing about you, there are dangers, too, in utilizing people who may be emotionally tied either to you, the grantor, or to the beneficiary of the trust. The disinterested professional may be able to make wiser choices than the person with closer personal and emotional interests. The latter party may find his or her judgment is clouded by the emotions.

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