Sylvia had her estate plan drafted. It was a revocable trust and pour over
will. The terms of the trust provide that upon her death, the assets are
to be divided between her two daughters, Alicia and Olivia. She made it
clear that she wanted everything divided 50/50. The trust was funded with
six different bank accounts.
She didn’t tell her attorneys about one account. It was a $200,000
savings account at Chase. The title of the account was “Sylvia,
on death pay Alicia”. (
This is called a “transfer on death account”).
The title on the account flies in the face of the trust. Olivia didn’t
get any part of the account because it was payable to Alicia who chose
not to share the assets in the account. Olivia was furious and sued for
her share of the account. Does the trust trump the title on the account?
Or, vice versa? What does the court decide?
The court decision was very clear.
The title on the account governs. Alicia is entitled to the entire $200,000.
There are two important lessons from this case:
The title of ALL accounts must be coordinated with the estate plan. Even one account that is inconsistent with the overall plan can cause significant
cost and distress.
If the account was titled in the name of the trust, there would have been
no problem whatsoever. Tell us about ALL accounts! Whenever you open or change an account we need
to know. It is imperative.
2. It is important to check all titles and all beneficiary designations,
not only at the outset, but on a regular basis. Things change very quickly
in our world. American National becomes Bank One becomes First National
Bank which becomes Chase. Who can keep track?
We have to. I don’t know when the death provisions of an estate plan are going
to be put in force. I can’t know the standing of all assets on that
exact date. Therefore,
I cannot assure my clients that their estate plans will work as intended
unless we have a regular review of the plan and update all the assets
funding the plan. This is the reason we remind you concerning your review date. We don’t
want to have this situation occur in your family.
Don’t let sister vs. sister happen in your family. When it’s
time for a review, let’s spend the time required.
Adapted from a recent article in the Wall Street Journal. (http://on.wsj.com/1cOdUgo)