Don’t Let Savings on Service Fees Haunt Your Estate

Has one of your client’s paid ongoing spousal support to a deceased ex-partner? Recent developments have raised this concern for executors who forego assistance from professional estate planners.

Laurie Pawlitza’s recent article, Zombie spousal support: When death doesn’t end your obligation to your ex, piqued our curiosity. It was a great read from the standpoint of family law, but it became even more interesting from the perspective of an estate planner. 

We meet a variety of people involved in estate administration, and many of them become “do-it-yourself executors” precisely when they’re preoccupied with other familial concerns—and even grief. These folks may be keenly interested in keeping costs down, minimizing the expense of professional advisors by doing everything without professional assistance.

Preparing tax returns, selling real estate privately, self-managing financial portfolios and foregoing legal advice are, however, areas where these executors—and the beneficiaries for whom they act—ultimately may not be able to afford the savings of a DIY approach.

Simply put, saving money normally reserved for an estate planner can impose larger costs further down the road due to oversights.

In Laurie Pawlitza’s article, one would expect that an alert lawyer acting for the estate of the deceased woman recognized the potential asset that the spousal support agreement represented and secured it for the beneficiaries.

“The agreement must contain a clause that spousal support ends on the death of the recipient, or you keep paying.”

The DIY executor who needed to pay for spousal support relied on legal precedent from another province, which was upheld once in his own province under different circumstances.

Unfortunately, the agreement the DIY executor wrote and signed left no room for the Justice to interpret that his spousal payments would end if his ex-spouse were to pass away, forcing him to continue paying her estate long after she passed away.

“The separation agreement also stated, “entitlement, quantum, and duration of spousal support is non-reviewable and may not be varied on any material change of circumstances.” Finally, it contained the standard clause found in most separation agreements: “This agreement shall be binding upon and shall enure to the benefit of the parties hereto, their respective heirs, executors, administrators, successors, designates and assigns.” To secure the wife’s payments, the husband agreed to carry life insurance, payable to the wife in the event he died before all the payments were made.”

Would the self-represented executor, in the course of saving some legal expense for the estate, have come to the same conclusion as the estate lawyer? He might have, but the Justice’s verdict indicates that he did not.

Working with a professional estate planner would have let the executor close the loophole regarding his payments to his ex-spouse’s estate. The money he paid to that estate far outweighed the fees saved from hiring a professional estate planner or administrator.

The fees that come with a professional estate planner’s advice ensure that such a loose end will not jeopardize the financial stability of an estate in the future.

Pawlitza’s article reinforces our belief that there are no “simple estates.” Download ERAssure’s free Executor Guide to identify where your estate needs professional assistance for a smooth transition.