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P R O B A T E & P R O P E R T Y
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You Don’t Do Estate Planning?
Practical Advice for Your Clients
By Irwin J. Dinn
I s your expertise not in the area of estate planning, but you care about the estate planning needs of your clients? Here’s some practical advice.
You’ve probably been to one or more CLE seminars on estate planning. You’ve read a bit and you even remember some of what was discussed in trusts and estates at law school. You’ve heard about all those alphabet trusts and wondered just who needs them. Should you venture into this area on behalf of your client without the aid of an experienced estate planner? The answer is “no.”
After more than 35 years of working with hundreds of clients and their estate planning, and then assisting many survivors, I’ve learned that the vast majority of clients want it simple. Although they like the idea of avoiding probate and saving on estate taxes, they don’t want to be tied up in knots. Make it easy for the executor, the trustee—the attorney, in fact—to do his or her job. Beware of canned wills and trust instruments that are beautifully written and try to cover every eventuality, most of which do not apply to the client’s needs. That 40-page trust instrument becomes a practical nightmare for the client’s family to understand and then carry out.
If the estate planning client’s wealth justifies the cost of creating and administering complicated trust arrangements, then seek out an experienced, knowledgeable “expert” planner. In such a case, your client may actually need a team of “experts” to formulate a plan, draft the documentation, and assist with the follow-through to meet the client’s needs, as well as those of his or her family. Otherwise, seek out an attorney who has done the drafting, as well as the handholding. A good estate planner must be willing to take the time to find out enough about your client to recommend an estate plan that meets the client’s needs and is simplest in administration. A good estate planner will also take the time to help the client understand the documents and what they are intended to accomplish. In light of the current uncertainty about the future of federal (and state) death taxes, this process becomes all the more complicated.
Make sure your client feels comfortable with the estate planning attorney—comfortable enough to ask the same question more than once without fear. Comfortable enough that your client will provide the attorney with personal information that might be essential to proper planning, including the disclosure of conflicts between the interests of a husband and wife that might not be known to you as their attorney. The services of an experienced planner, whether to plan a sophisticated multi-trust arrangement, or to create a much simpler arrangement, are not inexpensive. Make sure your client is getting his or her money’s worth. After all, the client gets no benefit from the planning, other than personal satisfaction. The survivors benefit from the tax savings, the simplicity, the flexibility, and the protection afforded by a good plan.
The following letter can be used by you, as an attorney whose expertise is not in estate planning, in whole or in part, to encourage your clients to do their estate planning. You already know enough to have the introductory discussion with your client. Take the time to acquaint yourself with one or more knowledgeable estate planning attorneys in your area. If you save just one family a year from the nightmare of dealing with incapacity or death without proper estate planning, you will have contributed immeasurably to our profession, as well as to your own personal status as an attorney.
Irwin J. Dinn is a partner with the law firm of Dinn, Hochman, Potter & Levy, LLC, in Cleveland, Ohio.
Perhaps you’ve been to several “estate planning” seminars. Maybe you’ve read a few articles in the paper or in magazines. Are you now ready to talk about practical estate planning? Here are answers to some frequently asked questions:
Why Do I Need It?
It’s not for you. It’s for your loved ones or for whomever else you want to leave your family heirlooms, your furniture, your collection of various and sundry magazines, newspaper articles, old tax returns, and utility bill receipts. Seriously, though, it’s planning for your car, your miscellaneous brokerage accounts, stocks, your bank accounts, your IRA and other retirement benefits, your home, your life insurance, and all the other things you’ve accumulated over your lifetime. By doing some estate planning before it is needed, you will save the aforementioned potential recipients of your generosity much time, much energy, and, of course, much expense.
What Do I Need?
The simple answer is that you need at least three properly prepared, properly executed documents. Most people, for various reasons, would be well served to have a fourth and fifth properly prepared, properly executed document, as well. A Will, possibly a Trust, a Durable Power of Attorney, a Health Care Power of Attorney, and, if you are not philosophically opposed to it, a Living Will are the tools used to carry out a practical, effective and efficient estate plan for most people.
What Are Each of These Tools?
The Will. The Will is a formally executed, written instrument, that directs your personal representative (a person to act in your place because you are deceased) to dispose of those assets that are or become “probate assets” in accordance with your written wishes. It is an instrument that names guardians (including alternatives) for your minor children. It is an instrument that designates who (including alternatives) you wish to serve as your personal representative. Simply put, your probate assets are those assets that are owned by you at death and do not pass to someone else under the terms of a contract that you entered into prior to death. Examples of probate assets include: real estate held in your name without survivorship rights in another; a bank or security account in your name without survivorship rights in another; your business; your household furnishings; your stamp collection. Any account or asset that is not set up to be transferred on death or paid on death to another named party is a probate asset. Thus, for example, the proceeds payable to a named beneficiary under a life insurance contract are not probate assets, nor are the proceeds payable to the named beneficiary of an IRA or other retirement benefit contract, nor is the joint and survivor, or payable on death, account you set up at your local bank. Picking your guardian and personal representative is the subject of further discussion.
The Trust. There are all kinds of Trusts. I mention only the simplest (it will look a lot more complicated than it is), which is a contract you enter into during your lifetime that directs your trustee to manage and/or dispose of the assets transferred to the Trust (during your lifetime and/or at your death) in accordance with the terms of the Trust. When minimizing or avoiding the unnecessary payment of estate or inheritance taxes is called for in your estate plans, a Trust is a necessary tool or vehicle to accomplish this goal for a husband and wife. It doesn’t happen very often, but once in a while mom and dad die leaving a minor child or children behind. A Trust Agreement sitting in a secure place, entered into before death, will serve to save that minor child or the minor children many dollars. And, oh yes—those children won’t get all of those assets at age 18! You could include a Trust as part of your Will. But your experienced estate planning attorney can explain the benefits of setting up a Trust separately from your Will during your lifetime. Most states will allow you to serve as your own trustee during your lifetime. Picking a co-trustee and whether to have one, and picking successor trustees, are subjects for further discussion.
The Durable Power of Attorney. The Durable Power of Attorney is a formal appointment of an agent (called an “attorney-in-fact”) to conduct your financial or business affairs in your name if you cannot do so yourself. What makes a Power of Attorney “Durable” is the language in the document that provides that the Power of Attorney will remain in effect even if you become incapacitated. Thus, if you do become incapacitated for a short or long period of time (or, for example, you are out of the country at the very time a business-related document needs to be signed), someone will have the power and authority to act on your behalf. This can be a very broad, all-inclusive power, or it may be limited to certain business affairs. This document may be broadened to designate who you would like to serve as your guardian or the guardian of your minor child or children if one were required (thus, if you become incapacitated and a guardian must be appointed for your minor children, because you haven’t died, your Will does not come into play). Who should serve and how broad a Power of Attorney should be are all subjects for further discussion.
The Health Care Power of Attorney . In this document you formally appoint a person to make health-care decisions for you when you lack (again, this could be short-term or long-term) the capacity to make them for yourself. Some states will allow you to customize your own form. Most states have a standard format that is easily recognizable by health-care providers.
The Living Will. This formal document is an announcement to the world that you do not want to be kept alive by artificial means. You do not want heroic measures taken to keep you alive. This document is philosophically optional. If the execution of a Living Will makes you feel uncomfortable, don’t be afraid to say so.
What makes estate planning simpler and, hopefully, more palatable for you, the client, is being able to sit down with an experienced estate planning attorney with whom you should feel comfortable in discussing the issues that will come to mind as you and the estate planner determine what tools are best suited for your needs and the needs of your family. Remember, it’s your assets that you want to preserve and protect during a period when you might be incapacitated, or pass on to your family (if that is the plan) in a fashion that saves taxes, if appropriate, and makes sense for your particular family situation. There is no good reason for putting off estate planning, even for young couples. A young couple with a total estate of $125,000, including life insurance, with one surviving minor child, can save that child thousands of dollars over the time of a potential guardianship, with some relatively simple estate planning. Planning for the eventuality of death or incompetence does not mean that it’s going to happen. The vast majority of Durable Powers of Attorney that I prepare are never used. Years go by and Wills and Trusts are either redone or amended. Over the years I have, on hundreds of occasions, said, “If you need these tools and you don’t have them, it’s too late to get them.”
So, let’s be proactive. I will be pleased to assist you in getting your estate planning accomplished, including, if necessary, providing you with the names of one or more qualified lawyers to assist in the process.
Very truly yours,