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Adapting and Revising Your Estate Plans after a Big Life Change

Dec 16, 2020

Paul S. Labiner

Paul Labiner

Managing
Partner

According to the Miami Association of Realtors, October 2020 was a hot month for home sales across South Florida. All three counties saw double-digit increases in total sales of single-family homes from last October:

  • Miami-Dade: 16.2% increase
  • Broward: 23.1%
  • Palm Beach: 34% increase

Sales of luxury homes ($1m+) had an especially strong month, surging 122% in Miami, 84% in Broward, and an incredible 141% in Palm Beach. However, more moderately priced homes in the $400k–$600k range also sold well with a roughly 50% increase across the tri-county area.

Even more exciting is that home prices also rose across South Florida—19.2% in Miami-Dade, 14.6% in Broward, and 17% in Palm Beach—boosting the existing home equity value of tens of thousands of residents.

With home sales and prices growing, it’s good to review the position your home (and real estate) plays in your total estate. For many families, real estate holdings are among their most valuable assets—assets important to building generational wealth. But, if you don’t properly incorporate your home and other real estate into your estate plan, you can leave your heirs with a nightmarish scenario.

Does Your Estate Plan Really Reflect Your Wishes?

We recommend periodic review of your estate planning documents. But it’s even more important after a major life change:

  • Relationships and marriages starting and ending,
  • New children or grandchildren,
  • Identification of special needs situation (e.g. an adult child’s illness or addiction),
  • Receiving a major inheritance,
  • Changes to asset holdings (e.g. buying a new home or acquiring stock).

Before and after any of these events, how you want your property and assets distributed may change significantly. If you don’t keep your basic estate planning documents up to date, your heirs could find themselves in a nightmare scenario. Let’s look at a textbook example of why estate plans need regular review and revision.

The Forgotten Ex

Imagine Tim and Mary. Both Tim and Mary were married previously, and Tim has two children with his ex-wife. After dating for a couple years, Mary moves into Tim’s house. She contributes money to home repairs and general upkeep as if she were a co-owner. At the same time, believing their relationship is headed toward marriage, Tim drafts a will that leaves his house to Mary if he were to die.

Unfortunately, a few years later Tim’s and Mary’s relationship falls apart and they break up. Tim reimburses Mary the amount she had put into maintaining the home in return for her signing over her interest in the property.

Another couple of years go by, and Tim dies in a car accident. Worse still, Tim never revised his will after he and Mary broke up, so the document still specifies that Mary should receive the home. Based on the will, Mary claims that she is the rightful heir of the home and not Tim’s children.

Mary technically signed over her ownership of the property after Tim and she broke up. But without contradictory documentation, Tim’s will is the only legal document that specifies what Tim wanted done with his property and possessions after his death.

Why Is This a Problem?

So, even though we know Tim and Mary broke up and we know she signed over her ownership, we don’t know whether Tim wanted Mary to have his house anyway. We cannot be certain whether Tim forgot to change his will or intentionally didn’t change it.

As such, Mary’s claim to the home is supported by a legally binding document—one that Tim had to have witnessed and notarized—and the personal representative of Tim’s estate will likely have to abide by the terms of his will.

If Tim’s children can find clear evidence that Tim did not want Mary to inherit the home, they may be able to dispute her claim of ownership. However, disputing a will requires court intervention and is not a guaranteed remedy.

Adapting to Life Changes

As our parable of Tim and Mary shows, estate planning documents reflect the situation at the time they were signed. However, as time goes on, these documents relfect your current wishes less and less.

The end of a long-term relationship or a divorce are huge life changes. When couples separate and do not change their estate planning documents to reflect this new situation, an ex may end up inheriting property that the deceased no longer wants them to have.

The same applies to non-romantic relationships with friends, parents, and children. There is no guarantee that documents drafted 5 or 10 years ago accurately reflect the current circumstances of a relationship.

Don’t Wait to Revamp Your Estate Plan

Regardless of whether we’re talking about stocks, retirement plans, or a newly purchase home, it is in the best interests of you and your family to make sure that your estate plan accurately reflects how you want your assets handled.

We urge you to take the necessary steps to protect your hard-earned assets and wealth. Whether you need to develop your first estate plan or update your existing plan, we can help take the fear and frustration out of the estate planning process.

Call us today at (561)998-2362 or fill out the confidential form below to schedule your free Financial Legacy Review now. We’ll talk about your planning needs, as well as many other facets of your overall financial and family plan.

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