Without doubt, moving creates massive disruption both before and after the actual event. Purchasing or selling real estate can have that effect on an estate plan, too, both because a change of assets can sometimes have unexpected effects, and because real estate often comprises one of the larger holdings.
Most people do not intend the real estate transaction to create dischord. A quick review of the estate plans can avert unbalanced distributions that can lead to disputes.
Several problems can arise when estate plans make gifts of specific real estate. Under such a scenario, when a property is sold, that portion of the estate plan will lapse. The intended beneficiary can not receive what is no longer the donor’s to give. If the plan distributed particular parcels of real estate to various beneficiaries, the previously contemplated distribution may become unbalanced. Thus, after the sale, some persons may receive more than others.
If a property that was designated for a particular beneficiary is sold and another is purchased, the new property will not automatically be distributed to the same person. Unless the owner makes a particular provision in the estate plan, the new real estate likely will be distributed according to any catch-all or pour-over provisions, either for other real estate or for the remainder of the estate.
If new real estate is not purchased, but the proceeds retained as cash or invested into other assets, then any distribution will be according to the directions set for that type of asset. Those instructions may vary widely from the instructions for real estate holdings.
In short, it is worth reviewing any estate plan to ensure that the intended distribution remains satisfactory after any significant change of assets to ensure that the owner’s intent is carried out, and to avoid potential disputes among family members and challenges to the estate plan.
Often a simple amendment to a trust or a codicil to a will, if properly drafted and executed, can address the problem without having to start from scratch.