This column first appeared in the San Antonio Express News and other Hearst newspapers on December 17, 2019.
Dear Mr. Premack: My father lives with me and my wife. My sister has been inattentive to our father since she turned 18, and my father doesn’t want her to inherit when he dies. Dad sold his home when he moved in with us, and changed all his accounts to say "Pay on Death" to me. Still, he has an old will that gives everything to me, but if I am not alive to my sister. What if my sister challenges our father's Will? – S.S.
Your situation all depends on your father’s intent, your father’s mental clarity, the duties you have assumed, and the clarity of the documents your father has signed. Fortunately, your question has surfaced while your father is still alive, and is hopefully fully capable. If there are issues with his current plan, he can work with his estate planning attorney to remedy the situation and protect you from a future battle.
You say all of your father’s assets are held in the Pay on Death (POD) accounts. Those are contractual arrangements with the bank which invoke Texas’ laws on non-testamentary assets. Your father and the bank have a contract, supported by statutory law, which makes you (the beneficiary) owner of his accounts as of the moment he dies. All you need to do is present your father’s death certificate to the bank, and they should treat you as owner of the funds.
Establishing a non-testamentary account removes that account from your father’s probate estate. Under Texas law, the POD accounts are not controlled by his Will and need not go to court to be released to you. When properly established, using non-testamentary arrangements is a viable way to avoid probate. Someday, when your father dies, you won’t need to probate his Will in order to claim the POD accounts.
But what if your sister challenges his Will? First, since you would not have probated the Will, your sister would have to follow a more complex, more expensive route to start a legal challenge of the Will. Second, even if she proved that the Will was invalid, his estate would not include the POD accounts. Her contest of the Will would put nothing into her pocket unless she can also win a challenge to the validity of the POD contract.
If she files such a suit, she generally has the burden to prove that the POD designations are not valid – which should be very difficult to prove so long as the bank’s paperwork is correct. She could allege that father was not of sound mind at time the POD contract was executed; however, she was not there and may lack such proof. She could allege that you breached a fiduciary duty by accepting benefit of the POD. However, she would have to prove that she was left out of the POD because you, not your father, set up the POD contract to exclude her (which is not true).
The best plan is to discuss the situation with your father, who is alive and hopefully is well. He should see his estate planning attorney to be sure his instructions are clear. If he does not want your sister to get anything, then he should 1) have his attorney draft a replacement Will removing her name, and 2) work with the bank to make sure the POD contract is correct.
The POD contract should include a contingent beneficiary in case you die before your father. He can name anyone – but if he does not want your sister to get the money, he should name a contingent beneficiary like your wife or children, or a charity. The point is: his instructions should be clear as they can be so his legal plans can be enacted at the time of his death without interference.
Paul Premack is a San Antonio Certified Elder Law Attorney, handling Wills and Trusts, Probate, and Elder Law issues. View past legal columns or submit free questions on those legal issues via www.Premack.com.