July 22, 2013

Holographic Will

A person should not expect the best results when they haphazardly do anything in life, estate planning is no different.

Estelle Elsa Manwell was a wealthy Californian. According to court documents, she owned real estate in Contra Costa and El Dorado County worth $1,238,848. On March 23, 2011, she executed a holographic will which bequeathed her estate to her 5 living children. For reasons unknown, her will was attested to by 9 witnesses (Author's comment: this is very peculiar, (a) a holographic will need not be witnessed and (b) even a type-written only requires 2 witnesses).  In terms of the real property, the will stated "I do not want any of my property sold outside of my family for a minimum of 20 years." Finally, the will did not nominate an executor nor mention bond. On March 25, 2011, Ms. Manwell passed away. 

There are notable problems with this situation. 

First, the most obvious defect is that there is no trust involved and there decedent owned real estate. Consequently, Manwell's estate must be probated and typically the only "winner" during probate is the attorney because they are handsomely paid. For an estate worth at least a $1M, the attorney can collect a statutory fee of $23,000. Meanwhile, the beneficiaries have to endure a costly and lengthy procedure, namely probate. 

Second, the will did not mention who would have priority to be administrator. Since the children all have equal priority, there existed the potential for conflict because the administrator can be compensated the same amount as the attorney. Consequently, court filings reveal that the children did in fact engage in adversarial proceedings to determine who would be administrator of their mother's estate.

Third, the will called for a lengthy restraint on the alienation of the estate's real property. In other words, the homes could not be sold for a long period of time after the decedent's death. I commonly advise clients to not insert such a clause in their trust because managing property is very expensive. The annual upkeep of a property, e.g. maintenance, property taxes, utilities, etc., is easily thousands of dollars. By essentially hand-cuffing the beneficiaries to the property, they deprive them of liquidity because they are not allowed to sell. I think clients like to keep "the farm in the family" because of the sentimental feelings attached to the property. This is an understandable feeling. Years of familial memories are deeply inter-twined with the property: birthdays, parties, holidays, family meals, etc. Still, the children do not automatically hold firm these same feelings. Hence, I like the notion of providing the children the option to keep or sell the residence. Thereby, the trust would omit a clause about keeping the real estate in the home.

Clearly Ms. Manwell knew that her demise was shortly coming, her will was written only 2 days prior to her death. It is logical to then assume that Ms. Manwell was trying to make the best of her situation. The problem is that sometimes it is too late to fully address all the issues. Despite her will, Ms. Manwell's estate is currently being litigated in probate court and her passing was over 2 years ago. Thus, it is doubtful that Ms. Manwell would be pleased with what that has ensued following her passing. The probate matter is replete with various motions, many of a bizarre nature, and does not appear to be resolved anytime in the foreseeable future.