My uncle was married many years ago, but he divorced and has remained single ever since. His first wife took him to the cleaners financially. They had no children.
He is currently in a romantic relationship and has enjoyed the company of the same lady friend for many years. They live separately. He is opposed to marriage because he understandably doesn’t want to lose half of his wealth for a second time.
“‘Would she have any legitimate claim to any portion of his estate?’”
He has generously made monetary loans to his lady friend and her family throughout the years, none of which are close to being fully repaid. He has a trust and a will in place. As his only living relative, I have been named as the eventual executor of his estate.
My elderly uncle’s lady friend is a gold digger and very manipulative. I am concerned that she will somehow try to contest my uncle’s trust or will after he dies by alleging that he promised her a share of his estate — and that she will have her conniving family back up her scheme.
Would she have any legitimate claim to any portion of his estate? If she contests the will or trust, would the estate have to foot the bill for all the legal fees incurred, or would I be personally liable for these costs as the executor of the estate after the proceeds of the estate are dispersed?
Nervous Nephew
Dear Nervous,
The issue of lending money aside, not every every person in a relationship that is unequal economically is in it for the money — what you term a “gold digger.” But the bigger issue is that a person should never loan money if they can’t afford not to have it repaid. My guess is that your uncle is aware of that and knows that this money may never be returned. It’s one of the most common issues in small-claims court between romantic partners: What is a loan and what is a gift?
If you do wish to loan money with the expectation or hope that it will be returned — including when it involves a family member, friend or loved one — always have a notarized loan agreement and give the borrower a definitive timeline to return the money.
U.S. states put a dollar limit on small-claims court cases, and it may be the case here that your uncle’s loans or gifts to his girlfriend exceed that amount. In Texas, for instance, that amount is $20,000. In California, individuals can claim up to $10,000 in small-claims court.
Spare a thought for this man’s children: Their father married his caregiver, who was 40 years his junior, in secret, and she now stands to inherit tens of millions of dollars from his estate. They may have been in love. Or she may have had an eye on his fortune.
Mitch Mitchell, associate counsel for estate planning at Trust & Will, an estate-planning platform in San Diego, Calif., says your uncle’s case is much simpler. He says that if your uncle has a trust and will in place, his assets should be distributed according to those documents after his death.
“ ‘If you do wish to loan money with the expectation or hope that it will be returned, always have a notarized loan agreement.’”
“If all of your uncle’s assets are in trust, any potential confrontation in probate court can likely be avoided,” he says. “One of the key benefits of having a fully funded revocable trust is probate avoidance. It crosses over with another one: privacy.”
If your uncle’s friend is not a beneficiary of this trust, she has no right to know anything about it. Similarly, “interested parties,” or those with legal standing, are the only people who are typically entitled to contest a will. They include spouses and children.
“To successfully contest the will or trust, your uncle’s lady friend would need to show that your uncle did not have the mental capacity to create the documents, that he was unduly influenced or that the documents were executed improperly,” Mitchell says.
“Your uncle’s lady friend also needs to show she has standing to bring the contest, which might prove more difficult for a nonspouse. Your uncle’s state might recognize common-law marriage, which may or may not help her claims,” he notes. Any contest would likely delay the distribution of assets and incur legal fees.
An executor of an estate typically charges 1% or 1.5% of the estate as compensation, but any legal fees would be paid out of the estate — not out of your pocket — because the individual or individuals would be challenging the validity of your uncle’s will, not you personally.
“You may want to consider discussing your concerns with your uncle and encouraging him to seek legal advice to ensure his estate plan is buttoned up to mitigate his lady friend’s potential claims,” Mitchell adds. “It sounds like he would appreciate your support, given his negative experience with his divorce.”
It’s better to have these conversations while your uncle is of sound mind — and with the help of an experienced estate attorney. If he makes a will, it may be that he wants to leave his girlfriend a small amount of money. Or he may consider the loans enough of a gift. The choice is his.
You can email The Moneyist with any financial and ethical questions at qfottrell@marketwatch.com, and follow Quentin Fottrell on Twitter.
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