The Delaware Supreme Court has just handed down a decision that dramatically illustrates the need to take a holistic approach to an estate plan to ensure that what you want to happen to your assets when you die, can and actually will happen.
Everett T. Conaway died on May 11, 2010, leaving to survive him his second wife, Janice, and his son from his first marriage, Jesse. Everett named Janice and Jesse as co-fiduciaries of his Will and his Trust. That was not successful and eventually the Court appointed a local attorney to independently handle the administration (who promptly thereafter sued both Janice and Jesse (see Conaway I, Conaway II and Conaway III). Carefully consider your appointment of fiduciaries to ensure that the fiduciaries (whether as successor trustees or as executors) can and will work together to complete the administration. If you have any concerns or hesitation, trust your gut and designate someone else.
Everett had utilized several estate planning tools: a pour-over Will; a Revocable Trust; and a limited partnership. However, these separate tools were not viewed holistically and therefore Everett’s estate plan was unsuccessful.
For instance, Everett’s Trust held a 69% interest in a limited partnership that he had entered into with Jesse. Everett attempted to leave that 69% limited partnership interest to Janice. That was not successful (as discussed in a previous post). There possibly could have been a way to accomplish Everett’s goal to leave this asset to Janice but simply ignoring the limitations that Everett had placed on the limited partnership agreement did not work.
Everett owned in his own name, Conaway Development Industries, Inc., which Everett had sold prior to his death. Under Everett’s Trust Agreement, Everett left that stock or the sales proceeds from the sale of the stock, to Janice. Unfortunately, this was not successful either. Because the stock was in Everett’s name alone (and not held in his Trust), the stock was available to Everett’s creditors (including an approximately $260,000 outstanding balance on an unsecured line of credit). Everett’s attempt to leave the proceeds from the sale to Janice failed since creditors have the superior right to be paid before beneficiaries. Had Everett retitled the Conaway Development Industries, Inc. stock (or the proceeds from the sale of the stock) into his Trust (with a simple assignment assuming it was permitted under the limited partnership agreement) Janice could have inherited the same.
Key Takeaway: Review your entire holdings (including how they are titled and whether there are any restrictions) and annually read your estate planning documents to ensure that what you want to happen to your assets, actually can and will happen.