Tuesday, March 7, 2017

Inheritance, rights and expectancy in Oregon - Did you have something to lose?

A tax lawyer once told me that an inheritance is the largest tax-free lump sum of money most people ever receive. Most wealthy Americans got their wealth because they inherited it. Parents most often leave their assets to their children, and children expect that they will inherit when their parents die. Children have an "expectation" that they will receive the wealth of the parents when the parents die. Googling the definition of “expectation” brings up the following:

the state of thinking or hoping that something, especially something pleasant, will happen or be the case.

In my office I see families in which the children are not only hoping that they will receive their parent's money, they are making life decisions based upon that hope. They are depending upon it. Sometimes they even jump the gun and begin taking and spending the money before the parents are gone.

In law, an "expectancy" is something you might get, but which you have no legal claim to. You expect your parents to leave you their money, but they don't have to. They can cut you out and leave it all to your siblings or cut everybody out and leave it to charity. They could leave you in the will but give or spend all the money before they die so you get nothing anyway. They might have named you as a beneficiary on a life insurance policy or a retirement account. You "expect" that they won't change the beneficiary, but you have no legal claim to the money until they die with your name still on the policy. If they do, you may feel like you have lost out, but in the eyes o the law you had nothing to lose.

Some expectancies are highly likely to materialize. If grandma named you in her will and she has now lost the cognitive ability to write a new will, that money is highly likely to be coming your way sooner or later. (The law assumes she can recover capacity and write a new will, so no matter how bad she is, it is still an expectancy.) Some vested legal claims are very unlikely to produce anything for you. If you buy a lottery ticket you have a legal right to the payout if your number is picked, but don't go taking out a loan on the hope it will pay off.

The difference between an expectancy and a vested right becomes important when something you hoped would happen does not. If I hoped to get some cash when grandma died, and it didn't happen, whether I can successfully sue someone may depend on whether my hope was based upon an expectancy or a right. If it is a right, I will have a document to hang my hat on. If it is an expectancy, the road may be tougher.

But it does get confusing.

If grandma named me in her will, but made a new will just before her death because my sister held a gun to her head, the second will is invalid. I have a vested right after grandma's death so long as I can prove that the second will was invalid. If grandma named me in her will, but just before her death she gave all her property to my sister because my sister held a gun to her head, I can sue my sister on behalf of my grandma's estate to recover the property wrongfully taken. In both cases I have a better claim to the money than the person who got it.

If, however, grandma changes her will or her beneficiary designations while capable and not subject to undue influence, I am out of luck. If she spends all her money on her new boyfriend or appoints an agent under a power of attorney who spends my inheritance on her care, I am similarly out of luck. If she or her agent takes all the money out of the account on which I am a beneficiary and puts it in an account for which I am not a beneficiary, I am out of luck. In these cases the change in the estate plan was not caused by wrongful behavior and the person who has the best right to the money is the person with their name on the last document signed by grandma. My expectancy is defeated.

I hate writing blog posts that end in my telling the reader he needs to consult an experienced probate attorney -- preferably the writer of this post -- but in this case it is true. If you feel wronged and are not sure whether your claim was an expectancy or a right, and whether there might be a benefit for you to take a trip the courthouse, talk to your local probate litigator.