A recent Wisconsin Supreme Court case, McLeod v. Mudlaff, is among the most recent in court cases with “estates gone wrong” issues. While the Supreme Court’s decision focused upon the validity of the decedent’s marriage, the case arose initially as a probate dispute. The breakdown of the deceased woman’s estate offers some helpful instruction about the potential benefits of living trusts in estate plans.
Ms. Laubenheimer created a will in 1999 leaving most of her estate to her three stepchildren. In early October 2008, Laubenheimer suffered a series of debilitating strokes and was admitted to a nursing facility. On October 11, two doctors signed a “Statement of Incapacitation”, attesting to her condition. Nevertheless, Joseph McLeod, who had been living with the woman, checked her out of her nursing home twice, on Oct. 27 and Nov. 3, to obtain a marriage license and hold a marriage ceremony. The woman died three months later.
A probate dispute ensued when McLeod argued that Laubenheimer’s 1999 will was invalid and that, because he was her husband and the woman never adopted her stepchildren, he was the sole heir of the woman’s $450,000 estate. The stepchildren contended that the woman lacked the mental ability to provided legal consent after her incapacitating strokes, making her marriage to McLeod invalid.
The issue before the Supreme Court focused solely on whether a trial court can invalidate a marriage after one spouse has died; however, Laubenheimer’s case also offers a valuable lesson regarding estate planning. In cases where, as the deceased woman’s stepchildren asserted here, a party seeks to manipulate the system to improperly gain control of another’s assets, a living trust may offer a degree of protection.
How a revocable trust can (and can’t) help
Many revocable living trusts name the trust’s trustor, or creator, as the original trustee. That person has the authority to manage all assets owned by the trust until an event occurs that triggers a transition to the successor trustee, whom the trust creator named at the time of the trust’s creation. Most trusts provide several events that trigger a successor trustee’s assumption of control, including the original trustee’s death or incapacitation. Often, trust documents state that the medical statements of two doctors provide sufficient proof to establish incapacitation. In Laubenheimer’s case, if she had created and funded a living trust with her assets, the two doctors’ October 11 “Statement of Incapacitation” likely would have triggered a transition of trusteeship of her trust from herself to her successor trustee, a person she would have named prior to her loss of mental capacity.