It’s clear that John Edwards can inherit from Elizabeth’s estate even though she wrote him out of her will. Lawyers say her estate planners may be culpable.
UPDATE: John is now facing a grand jury probe into whether up to $3.3 million of his campaign funds were funneled toward hiding his extramarital affair from Elizabeth and the rest of the country. Details here.
Controversy around Elizabeth Edwards’ deathbed estate directives has shifted from whether she deliberately disinherited estranged philandering husband John to whether the will was ever viable anyway.
Edwards, who practiced law herself for nearly two decades, clearly had something in mind when she signed a new will barely a week before her death December 10.
The new will ignores John Edwards, former senator from North Carolina, completely. Instead, it elegantly leaves Elizabeth’s personal property to her children and pours everything else into her revocable living trust.
But no matter what her will says, North Carolina probate law gives John the right to claim an “elective share” of up to 1/3 of the entire estate -- the personal property valued at maybe $1.5 million and the assets in the trust.
Elizabeth’s lawyer would have known that they would’ve needed to jump through some serious hoops if they were serious about disinheriting John, says Chapel Hill estate attorney Gregory Herman-Giddens.
“It’s not easy to avoid the elective share by planning,” he explains.
So the question is why they let her even try, if that’s what the new will was supposed to accomplish.
Avoiding the elective share
In fact, if Elizabeth truly wanted to keep John from getting one cent, and if her estate planner failed to remind her that it was impossible, the beneficiaries in her trust may be able to sue to recapture anything John takes.
This is unlikely, but it’s worth thinking about as a cautionary tale to other estate planners living in states where the elective share principle applies to trust assets as well as property that passes through probate.
It’s nearly impossible to exclude a spouse from at least a bit of the probate estate without significant advance planning. Even Georgia, the strictest state when it comes to elective shares, would let John draw a one-year allowance from the roughly $1.5 million in personal property Elizabeth left behind.
But since Elizabeth’s final will included a pour-over provision to funnel unassigned assets to the Anania Edwards Trust, it’s likely that most of her wealth -- as a career lawyer, businesswoman and best-selling writer -- was already in trust when she died.
Because trust documents are confidential, we just don’t know what’s in the trust. But we do know that in North Carolina and most other unified probate code states, John could use his elective share to make himself a 1/3 beneficiary if he wanted to do so.
Had the Edwards family lived in a community property state or a non-UPC state, the trust would’ve been secure and only Elizabeth’s designated beneficiaries -- probably adult daughter Catharine and the two minor children -- would’ve gotten a share of its assets.
As a public figure worth at least $30 million in his own right, John is vanishingly unlikely to risk the stink of fighting his own kids for their dead mother’s money, but other estranged dads may not be so high-minded.
Malpractice unlikely (but possible)
In any event, there’s a slim case for estate planning malpractice if Catharine Edwards, who is both executor and trustee, feels that her mother’s wishes were not accurately reflected or respected.
Veteran estate planner Steve Oshins says that although malpractice is possible in this case, it's not likely. The lawyer was doing the best he could under the circumstances.
"Clients always want what they can't get, but sometimes they don't get it," he says. "In this case, the situation just didn't work out as advertised."
Suing the planner would be “a steep uphill battle,” according to Minneapolis lawyer Alex Bajwa.
“The planner could be liable if Elizabeth Edwards’ intention was to minimize the size of the elective share,” he explains.
But the burden of proof is high. “Out of the two people that actually know what Ms. Edwards’ intentions were, one is dead, and the other would not admit malpractice of this caliber,” Bajwa continues.
Chapel Hill attorney Gregory Herman-Giddens acknowledges that lawsuits of this type are still possible, although the expense of pursuing the suit may end up higher than the amount of money recovered.
Unfortunately, if Elizabeth had truly meant to bar John from the trust assets -- and to be fair, he might be a beneficiary anyway -- her lawyer probably would have needed to get him to sign a postnuptial agreement to that effect.
The timing would’ve been tight but possible. Elizabeth and John separated in January 2009 after he admitted he’d had a daughter with his mistress. During that time, as the aggrieved and cancer-fighting wife of a politician, she had plenty of leverage to get him to sign just about anything.
Planning for all outcomes
In any event, the Edwards case highlights how estate planning documents function to not only assign property but to adapt to unexpected scenarios, all the while serving as literal testaments to people’s sometimes complex wishes and regrets.
The will itself seems to have been an eleventh-hour move held in reserve in the event that Elizabeth’s breast cancer reached a terminal stage before her mandatory year of separation ended and she could file for divorce.
The document was originally drafted in October and the date was amended by hand. She signed on December 1. On December 6, the family announced that she had stopped treatment, and the day after, she was dead.
Had she lived a few months longer, she could’ve gotten her divorce, eliminating the elective share issue once and for all and possibly negating the need for the new will.
Once Elizabeth learned that might not happen, the October will may have come back out as a way to remind the world that she may be dying still legally married to John, but it definitely wasn’t by design.
“I think there is some evidence that she merely meant for the will to send a message,” Minnesota lawyer Bajwa says.
On that front, this estate plan seems to have been a success.
Scott Martin, contributing editor, The Trust Advisor Blog. Steve Maimes contributed to the research.