We have daily conversations with clients that present so many different planning challenges. One of the best things about our job as estate planners is to be able to meet so many different people and work with them to help them positively plan for their goals. Everyone is different and thus everyone’s estate plan is different. However, there is one consistency with all clients. We, as the estate planning attorney, can draft the perfect document and provide the perfect road map for the client to accomplish their goals, but if they do not take the steps needed to activate/complete the plan, the plan may never come to fruition.
On June 3, 2013, the Supreme Court of the United States decided Hillman v. Maretta, a case concerning a Virginia decedent who failed to remove his ex-spouse as the beneficiary for his FEGLI life insurance policy. Virginia law provides that in the event an individual dies owning a contract which provides a death benefit to a former spouse and a formal change in marital status did occur; such beneficiary designation of the ex-spouse is revoked. Further, the Virginia statute goes on to state that even in the event that federal law preempts such action, a cause of action accrues to the surviving spouse to sue the former spouse and recover the life insurance proceeds paid out. In this case, Mr. Hillman never changed his beneficiary designation on his FEGLI life insurance policy and upon his death, his ex-spouse, Ms. Maretta, was the designated beneficiary. When Mr. Hillman died, Ms. Maretta filed and received the life insurance proceeds. Under the then Virginia law, Ms. Hillman sued Ms. Maretta to recover these proceeds. Unfortunately for Ms. Hillman, the surviving spouse, the Supreme Court ruled that Federal law preempts the entirety of the Virginia Statute and, that under The Federal Employees’ Group Life Insurance Act of 1954, the beneficiary, as designated with FEGLI, is entitled to the entirety of the proceeds.
While the Hillman decision can be viewed in a narrow scope, i.e. only applying to FEGLI life insurance, it provides an illustration of the bigger picture. Estate planning is a lifelong evolving process and it can change daily/monthly/yearly depending on events in one’s life. Furthermore, estate planning involves a team effort. We always involve our clients in putting the plan into place so that they understand and assist in making sure their goals are accomplished.
There are a lot of moving parts in an estate plan and each has to be put in the proper place for the plan to come to fruition. I liken this to the game of Jenga where if a block is not in the right spot, BOOM! it all comes crashing down. We can work night and day to prepare the perfect estate planning documents for a client. However, if the proper follow-up steps aren’t taken, then that hard work could amount to no more than just a pile of expensive papers. In Hillman, it is unclear whether it was just their intention to rely on the Virginia statute, or if Mr. Hillman was not advised properly. No matter the answer, the moral of the story is still the same; you have to take the necessary steps to complete the estate plan (i.e. beneficiary designations, opening trust accounts, etc.), just drafting the paperwork is not enough. Further, estate planning is not just a one day event; it is a lifetime process that requires constant supervision to account for changes such as life, death, marriage, divorce, bankruptcy and disability.
The Hillman case is a great illustration of the question, what is an estate plan? The answer being that it is not just a pile of paperwork that you execute in an attorney’s office, but rather it is numerous moving parts, such as beneficiary designations, that require constant review and supervision. If you haven’t reviewed all facets of your estate plan lately, now is a good time to start. Don’t end up with the headline above and allow that to be part of your lasting legacy.
– Adam Abramowitz, Esq.