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The danger of relying on oral promises in estate planning

Texas residents should beware of relying on oral promises for their estate planning needs. One of the main functions of a will and estate plan is to make sure that your wishes for the distribution of your assets are clear and followed. If you make an oral promise that is inconsistent with your will or greater estate plan, there is no guarantee that this oral promise will be honored. In fact, it is more likely that a court will throw out any probate litigation based on the alleged promise.

That is what happened in the case of one of the world's richest men, Richard Pratt. The billionaire businessman died recently and his wife of 50 years was probably horrified when a former high-end escort emerged and made a claim against the businessman's estate based on an oral promise.

The former escort said that she quit her lucrative career in order to become Pratt's full time mistress. In exchange the businessman allegedly promised the escort $500,000 per year, a $100,000 Mercedes Benz, $5 million trust funds for her children, and $66,000 per year in rent and travel allowances.

Pratt's wife and the estate challenged the lawsuit claiming that the mistress was a drug user with a reputation for dishonesty. The estate also argued that the mistress did not have a claim against the estate because she settled with Pratt not once, but twice, before he died.

A judge recently ruled that the $150,000 settlement that the mistress took barred her claim. The judge didn't dispute the fact that the conversations and promises regarding the mistress' upkeep were probably made, but rather determined that these promises were not legally enforceable.

This case is a reminder that although a strong estate plan cannot prevent such lawsuits, a strong estate plan can prevent claims of oral promises for prevailing in probate.

Source: Forbes, "Estate of Richard Pratt, Australian Billionaire, Defeats Mistress In Court," Danielle and Andy Mayoras, Jan. 16, 2012

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