Too often, people do not realize how crucial it is to create and maintain an estate plan. Documents such as living trusts protect your assets and your family should you become incapacitated or pass away. Unfortunately for Cecilia Cordova’s parents, their daughter did not have one, and now they are dealing with the financial repercussions.
Good Intentions Lead to Costly Error
Cecilia was a healthy, 32-year-old single woman. She was ambitious and determined to build a successful medical career. Though she’d completed her medical training and had a good job, her school loans made saving money for a home difficult. However, she really wanted to move out of her rental apartment and into her own place, so she spent a year looking for the right house, hoping she’d have enough for a down payment.
A Financial Arrangement
She finally found a cottage within her price range, in a good neighborhood, and near the hospital where she worked. However, she still did not have enough money for the down payment. Even though her parents were divorced, they were on good terms, so Cecilia met with them together.
She told them about the house she found and asked for their help with the down payment. Cecilia knew that even with her parents help it wouldn’t be easy, so she’d developed a budget that included monthly payments to them. She shared her plan with her parents. They had no reason to believe Cecilia would not repay them as planned, and so they loaned her the money.
A Tragic Accident
With her parents’ help, Cecilia locked in the house. The day after her escrow closed, Cecilia was heading home after a long day at work. It was late at night and Cecilia did not notice that a car was speeding through the intersection, ignoring the four-way stop sign. The car struck the driver’s side of her vehicle, killing her on impact.
The Probate Holdup
Though Cecilia displayed financial responsibility in many aspects of her life, she had not considered creating an estate plan to protect her investments, leaving her parents’ finances vulnerable.
Cecilia lived in California, so when she passed away, her home was subject to the state’s probate rules requiring probate proceedings for any property valued higher than $166.250.
Without their daughter’s monthly payments, her parents were strapped for cash every month. Their once-good relationship crumbled. The house is on the market, but it still hasn’t sold after a year. Buyers are opposed to purchasing a property that is in probate. Until it sells, Cecilia’s parents won’t receive financial relief. Even if it does sell, there is no guarantee they’ll get their money back after Cecilia’s other debts are paid.
A Living Trust Protects Property From Probate
Had Cecilia worked with an AmeriEstate partner to create a living trust for her assets, her parents might have avoided the probate process for the house. Though she was not married and didn’t have children, she could have named her parents as trustees, allowing them control over her assets without court intervention.
No matter your current financial or life situation, an up-to-date estate plan protects you and your family now and in the future. Get in touch to find out more about estate planning with AmeriEstate.
Sources:
https://www.bankrate.com/real-estate/what-is-mortgage-escrow/