Contracts may affect estate planning

On Behalf of | Dec 28, 2018 | trusts

Estate planning can be as simple or as complicated as is necessary to meet an individual’s identified needs. For some, a basic will with easily understood provisions is enough to bring their estate planning goals into reality. Others, though, require much more detailed documentation. This may be due to their high net worth, or it may have to do with the restrictions they wish to place on their estate’s assets upon passing. Either way, estate planners need to ensure that they fully understand the legal ramifications of all the legal agreements they enter into.

Those who fail to be diligent when entering into contracts can find that seemingly unrelated agreements can have an effect on their estate plan. For example, an agreement between an individual and a cooperative or a homeowners’ association may contain terms that affect a revocable trust. This is especially true if the property itself is being transferred to the trust at the time of purchase.

These issues generally arise because these types of agreements typically utilize standardized forms that may not be applicable to the situation at hand. Therefore, an individual may find him or herself in a position where modifying a revocable trust to remove the property from the trust requires the authorization of a housing cooperative or HOA. This is ineffective and may serve as a detriment to an individual’s estate plan.

This is why it is critical that individuals ensure that they have a sound estate plan that fits their needs, and also a full understanding of how other contractual agreements may affect that plan. Individuals should be hesitant to sign standardized legal documents without first confirming with their attorney to determine how, if at all, it may affect their estate plan. Those who have questions about these issues can discuss them with their attorney.