Learn to look before you leap

Issue August 2015

I recently came across two life estate situations that proved disastrous. In one case, the disaster befell one of the remaindermen. In the other, the life tenant learned a hard lesson.

The initial issue with the life tenant's situation is probably quite common. Specifically, the life tenant wanted to take her full fee interest back, not realizing that the transfer was irreversible unless the holder(s) of the remainder interest(s) agree otherwise. However, one of the remaindermen had died with heirs who were very happy to have the windfall and saw no reason to relinquish it.

The remainderman's situation involved a family "estate plan" of which the remainderman was unaware. After suffering serious financial setbacks, she regrettably learned that she had an interest in real estate that was subject to attachment and not exempt in a bankruptcy, whereas all her other interests were safe. The remainder interest was lost to creditors and the intent of the life tenant was not realized.

A common thread in both situations was that they were set up by new attorneys in solo practices. There has been a lot written about the legal profession's decline in providing jobs for law school graduates and the corresponding decline in opportunities for mentoring afforded by chatting with one's employer. We all come out of law school with a lot of knowledge and a method of thinking suitable for starting out in this profession. However, very few of us start out with the everyday practical aspects of using these assets. I think that the use of life estates in the two situations described above is an example of how a little mentoring could have gone a long way. A young attorney struggling in his/her own practice may short cut seeking some practical advice and apply a simple solution in an age where "keep it simple" may be an overused credo.

I feel fortunate that I came into this profession as an associate with a number of practitioners under one roof with whom I could consult to learn the practical applications of a law school education. Since that time I have been fortunate enough to always have an associate or partner with whom I could consult about or to whom I could delegate the estate planning clientele that naturally developed from an active residential real estate practice. I hope that new attorneys starting out, particularly those who find it necessary or preferable to start out on their own, will be afforded opportunities to readily avail themselves of the experience of those of us who learned on the job by way of the long-standing traditions of this profession.