The Tragedy of John and Rita Famson
By: Barry E. Haimo, Esq.
May 28, 2014
John and Rita were college sweethearts and married young. They are now in their sixties and have two adult children together, Jen and Rachel. Rachel’s marriage is rocky and Jen is terribly financially irresponsible. John also has a minor son from another marriage, Jack. Their family is like many families: there’s fights but everyone has the right perspective and values. They gather together often and would consider themselves close-knit, normal and happy.
For their daily lives, John and Rita enjoy a steady pension income from John’s military service and two IRAs. Together John and Rita have a variety of other assets, totaling $850,000 which are all owned by either John or Rita. John also owns a life insurance policy for $1 million dollars insuring his life with Rita as the beneficiary.
One day, John and Rita’s neighbor and friend, Steve, died suddenly of a heart attack. John and Steve had just played racquetball together the weekend before. “We were flirting with hosting a BBQ and planning a few trips together when –” John said to Rita shaking his head in disbelief. It really shook John up.
The following week, John and Rita began to accept their own mortality. They began contemplating how they want their assets devised upon their deaths. While they want to benefit their children, they each agreed to donate half of their estate to charity, a small fraction to Rita’s brother, Jim, who always needs a hand, and to make sure Jack received something. John proudly brought home a do-it-yourself estate planning kit from Target. “Only $49!” John raved to Rita. Rita’s natural cautiousness bubbled to the surface, “John, are you sure that’s sufficient for our needs?” she asked. “I think so. We can have Larry (their quasi-friend that’s an attorney) review it for us to make sure it’s done right. Ok?” “Ok.”
So they determined how to devise their assets and completed the forms. They gathered around the kitchen table and executed the documents. They ceremoniously made a night of it. Then they had a talk with their children telling them how their estate would transition when they pass.
Unfortunately, years later John passed away. They hadn’t updated their documents because things kept coming up. He left his assets to Rita in his Will, but his Will was not validly executed. Consequently, his assets went through probate as a result. Upon discovery of the invalidity of John’s Will, Rita expelled a frightful sigh knowing her initial instinct about do-it-yourself estate planning documents was right. The good news is that the statute applies and her assets go to her anyway. The bad news is that the statute will apply. After a long, exhausting, expensive and drawn out process, Rita inherited all the assets.
Following John’s death, Rita remained a hopeless romantic. She wasn’t interested in dating. Sadly, she was very lonely and she passed away within nine months of John’s death before she had a chance to update her documents. Her defective self-made Will donating her assets to charity and her family – including her brother – could not be admitted to probate. As a result, Florida’s laws of intestacy governed the disposition of her estate (including the balance of life insurance proceeds of John’s policy). According to Florida law, her children, Jen and Rachel, inherited her assets equally.
Consequently, because of her defective Will, neither her brother, Jim, John’s son (Rita’s step-son), Jack, nor the charity, received any inheritance from her and John’s estate. Even worse, neither John nor Rita will ever know that their wishes weren’t carried out. To add insult to injury, their daughters, Jen and Rachel, were terribly poor candidates to receive an inheritance outright. Jen commingled her inheritance with her marital assets. To her husband’s benefit, these assets were captured as marital assets in her pending divorce and split equally. Similarly wasteful, Rachel had a shopping problem, and her inheritance was short-lived. Regrettably, she spent her money on trendy clothes within weeks of receiving access to her inheritance of her parents hard-earned assets. Imagine how John and Rita would feel knowing how their assets were distributed and not preserved. What message did it send to their children about planning ahead?
Barry E. Haimo, Esq.
Strategic Planning With Purpose
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