Why Estate Planning Matters

Freda was 26 years old when she gave birth to her only son, Jimmy. She was married, but her husband, Max, was physically and mentally abusive to her. Freda worked hard in and out of the home, loved Jimmy dearly and they had a close, good relationship. While Max was physically present, he was emotionally absent for Jimmy as he grew up. Despite his father's indifference, Jimmy's relationship with his mother molded him into a kind and thoughtful person.

In high school, Jimmy was a good student, but college was not for him. When he was in his twenties, he moved out of the house to make his own way without special skills, but with his big heart.

Eventually, Jimmy moved to another state, thousands of miles away from home, drawn by a job and a girlfriend. He didn't have the money to get home often, maybe twice a year, but he kept in touch with his parents by phone, cards and letters. Freda told friends and family often how much she "misses Jimmy and wished he would come home more, but he always tells me he loves me when he writes."

Max died when Jimmy was about 38, and his death didn't impact Jimmy much, but it made things financially difficult for Freda, who was 64. She was doing laundry babysitting for people as her sole means of support, often for cash. She did qualify for a modest amount of Social Security based on Max's earnings when she turned 65 and, even though she kept working, things were hard for Freda financially. She had almost no savings but at least the mortgage on her modest home was paid off. However, every year Freda faced the daunting task of finding money to pay the real estate taxes of over $3,000.00. As she got older and earned less money, she had to secure a home equity line of credit, using her house as collateral, just to pay those taxes. She told Jimmy about her struggles, and he would send her the little money he could afford from time to time.

Jimmy always earned enough to pay his bills but little more. He never married, and by the time he was 55, he had managed to save about $15,000.00 in an IRA. Unexpectedly, Jimmy got very sick. However, by the time he told his mom he had cancer, he was gone only nine months later. Jimmy did not have health insurance when he got sick and his medical bills soared to over $50,000.00. A small life insurance policy he owned was just enough to pay for his simple funeral and burial.

The only asset Jimmy owned, other than used furniture, was his IRA. Unfortunately, he never bothered to designate a beneficiary for the account. Freda talked to a lawyer and found out that the IRA money would be part of his estate, and she would have to petition the Register of Wills to be appointed as Jimmy's administrator in order to claim the money. However, she would have to pay the money to the hospital after paying legal fees of several thousand dollars. There would be nothing left for Freda. By now, she was 81 years old and had monthly loan payments on a balance of over $10,000.00 because of the yearly tax bills.

Freda missed her son terribly and was sad she would never see him or hear his voice again and there would be no more cards saying "I love you". A mother should never have to bury her son, she lamented. She also wondered why did Jimmy, who had been so thoughtful and caring all his life, did not take the time to fill out a simple beneficiary form naming her to receive his IRA. If only he had! Then, she would have received the money without paying legal fees or hospital bills. That money could have paid off the mortgage on her house with enough left over to pay at least one more year's real estate taxes.

After a year or so, Freda convinced herself that the money didn't matter. However, to this day, she still wonders why Jimmy didn't think it was important to name her as the beneficiary on the IRA. The form would only take a few minutes to complete and it would have made a world of difference for her. It would have been a simple act of thoughtfulness.

This is a fictional account using facts and circumstances which are common in many family situations. The legal principles are general in nature and should not be considered legal advice. To understand how beneficiary designations fit into an overall plan for your estate, please contact one of our estate planning attorneys.