BEST LAID PLANS DO NOT ALWAYS WORK OUT
A case with an interesting factual background came out of Texas recently. While it was based on Texas law and the case is binding in only Texas, the legal principles discussed by the Court are equally applicable to New York or any other jurisdiction for that matter. More importantly, the set of events that gave rise to the case could happen anywhere. It just so happened that it occured in Texas rather than New York or somewhere else. The Texas Court of Appeals case of Gordon v. Gordon revolved around a trust that took ownership of a specific peace of real estate property and how that transaction related to a will signed subsequent to the trust. More specifically, the Court determined that the act of creating and endorsing a will by the testator subsequent to the transfer of the real estate did not overturn or cancel the previous transfer of the real estate to the trust. The will, however, contained language that by endorsing the will, the testator supersedes all previous transactions indicated in the trust documents, such as annuities or certificates of deposit. It never mentioned the real estate.
In 2009 (Mother) Beverly Gordon and (Father) Patrick Gordon executed a trust document which they funded with personal property and real estate. The very terms of the trust indicated that the trust could only be revoked by either Father or Mother and only by following the specific set of instructions laid out in the trust document, namely by signing and delivering a letter to the trustee. The letter had to indicate that they individually or jointly are going to cancel or revoke the trust. The trust further provided that upon the death of either of them the trust become irrevocable. They funded the trust with personal property and real estate. Soon thereafter, their son John sought to reduce the risk of an estate battle by creating a will that specifically stated that the parties want to cancel the terms of the trust. Neither Mr. Gordon nor Mrs. Gordon did anything to transfer their personal property or real estate out of the trust. Moreover, John did not act to convince his parents to move the property out of the trust. Mr. Gordon passed away within a year of signing the new will.
After Mr. Gordon passed away, John sought to probate the will. Despite his intention to avoid an estate battle, he ended up in one with his mother over the transfer of real estate to the trust. Mrs. Gordon indicated that when she executed the will, the real estate in dispute was not part of their estate since it was then owned by the trust.
The case shows the need for an experienced estate planning attorney to draw up the various estate planning documents. Even the best planning by a layman can result in future problems that can cause much heartache and a rift within a family. All the normal cliches apply; an ounce of prevention is worth a pound of cure or a stitch in time saves nine. If all the parties involved in the case worked with an experienced estate planning attorney, no doubt there would be a different outcome, either by creation of a different type of trust or the will would be worded differently or all parties would understand what specifically was owned by the trust and not transferred and what will pass via the will.