Let’s suppose the fictional client, Lucy Laidback, retains an estate planning attorney to prepare her Will and other estate planning documents. Lucy tells her attorney, “I’m not really sure what to do here. Who knows what the world is going to be like when I die? One of my sons is an alcoholic, and I’m unsure if I should make him an estate beneficiary because he might spend all the money on booze. And my daughter is so financially irresponsible. She could easily spend her entire inheritance in one afternoon at Nordstrom! I think I’ll just give everything to my third child, Henry, and name Henry as my Personal Representative. Henry is the responsible one. He can decide what to do with my money and make the call as to whether to give some of it to his siblings or just keep it.”
Do you see any problems with Lucy naming Henry as the sole beneficiary of her estate?
Assuming that Henry is appointed as Personal Representative by the court, Henry will be required to file an Oath of Personal Representative in the probate proceeding. This oath requires Henry to declare that he will perform his duties as a fiduciary according to Washington law. Washington law requires Henry to distribute Lucy’s assets as set forth in her Will. Since Lucy’s Will makes Henry the sole beneficiary, Henry must distribute all of the estate’s assets to himself. He lacks the discretion to do anything else, with certain exceptions.
One of those exceptions is that Henry can work with the probate attorney to enter into a Nonjudicial Dispute Resolution Agreement that allows him to make estate distributions that do not follow the Will’s instructions. Of course, time, effort, and attorneys’ fees would be required to prepare this document. In addition, this type of agreement is only an option if everyone interested in the estate also agrees to its terms.
Another exception is that Henry can disclaim all or part of his inheritance pursuant to RCW 11.86.021. As defined by RCW 11.86.011(5), a disclaimer “means any writing which declines, refuses, renounces, or disclaims any interest that would otherwise be taken by a beneficiary.” The problem with Henry filing a disclaimer in the probate proceeding would be that any amounts Henry disclaimed would then be distributed pursuant to Washington law governing intestate succession since Lucy named no other beneficiaries in her Will. Henry would have no control over how the disclaimed portion of his inheritance would be distributed.
Another option in this scenario is that Henry could simply take his entire inheritance, and then personally give money to his siblings as he chooses. The problem with this idea is that Henry will need to file a gift tax return if he gives more than $17,000 to any of his siblings in a given year.
One final factor should be considered here: fairness to Henry. Lucy is forcing Henry to spend extra time administering her estate and making tough decisions about estate distributions. Lucy has put Henry in a position to make potentially painful choices that may alienate him from his siblings. Lucy can and should make these decisions herself.
Do you need guidance in making choices about distributing your assets so as to avoid this scenario? If so, please let us know. We’d be happy to help.
Phone: (206) 784-5305
