The words “Wills, Trusts, Powers of Attorney and Health Care Directives” are at the top of the news cycles today. These documents are the building blocks of a good estate plan. The Covid-19 crisis is a stern reminder of the fragility of life and the risks to your nest egg. Now is the time to consider your options.
In the current climate this author has seen a young professional working remotely responding to an email from HR Department offering a free estate plan; an Arizona resident excited to read the advertisement on his online HOA newsletter that a nearby law firm is offering low cost estate plans for persons affected by Covid-19; a couple following up on-line after an advertisement from a national legal forms service advertising their simple estate plans, coupled with telephone assistance from a “real lawyer”; a busy CEO living in Portland asking her business attorney COO, to prepare an estate plan, which he agrees to do. It is fast, easy, and does the trick. But does it?
Is this “estate planning?” Do these readily available options make the most sense? Are they the best approach to updating your old estate plan, or putting one together for the first time? You may be terrified about the reality of death, or reluctant to spend a lot of time dwelling on it. You may not want to give too much thought to the possibility of facing a disabling illness that impairs your ability to function on your own. You know it could happen, but you do not want to think about it for very long. The easiest thing to do is to go online and fill out a form or ask the nearest lawyer to prepare these documents for you. It will not cost much, and when it is done you will be relieved you did the adult thing and faced your fears.
We have all read the stories about people who come close to dying but recover. People commonly say that their life flashed by them, that they have a renewed sense of appreciation for their friends and family, or a changed perspective on what is important in their lives. Against that background, ask yourself if you want to take the easy way out (no pun intended), or whether you want to give more serious thought to the documents you sign for such a serious event.
Things go wrong when you are not thoughtful about the steps you undertake. Consider some real-life examples of things gone wrong, with slight changes to protect the real-life families affected by these events.
Example 1: YP, a young unmarried professional, fills out the forms for a free estate plan. YP was raised by one parent and is estranged from the other parent because of his lifetime of drug abuse. YP also has an estranged sibling who has gone the way of the drug abusing parent. YP fills out the form for a “simple will” designed for the state where YP lives. YP wants everything to pass to the parent who raised YP. The governing paragraph provides for everything to pass to that parent if that parent is surviving. If that parent is not surviving, then everything passes to YP’s best friend. All good so far, right? Wrong. The next paragraph is the “No Survivors” provision. It says that if none of your selected beneficiaries are alive on your death, then your assets will go to your “heirs at law.” In YP’s state, the heirs at law would be the estranged parent. If the estranged parent is not surviving, then the estranged sibling would be the heir at law. On YP’s death, if both her beloved parent and her best friend are not surviving, then YP’s assets pass to YP’s estranged family members.
Example 2: MC, A married couple hires a local law firm advertising its lower cost “trusts” in their local newspaper. (Bear with me dear reader, it takes twice as long to tell the story of a married couple.) The lower cost trust is partially a function of the fact that the lawyer does everything in one meeting. The lawyer presents its estate planning in the form of a seminar instructing multiple seminar attendants on the basics of their plan. After the seminar, the attendees withdraw to a private room where they meet with a paralegal who prepares their documents right there and then. Like the ER doctor in their local hospital, the lawyer goes from private room to private room answering questions until the paralegal finishes the documents and witnesses their signing.
This was a second marriage of many years for both spouses. They had no joint children. Husband had one child, a son. Wife had one son and two daughters. The four children were raised together as one family. Each spouse wanted “everything to go to their surviving spouse,” then what remains to go to the four children equally. They had multiple assets and Husband had a sizable retirement account. They understood from the lawyer’s presentation that to control the outcome after the first death, the assets that go to the surviving spouse would have to be in a trust. They also understood that a “disclaimer trust” could help with tax planning. They said they wanted those trusts to minimize tax, so the assets would need to go in equal shares to all four children on the second death. They shared their decisions and watched while the paralegal filled out the forms. There were a lot of provisions that the lawyer and the paralegal reviewed during that meeting, showing the couple the terms of the trust that provided for a surviving spouse and the gifts to four children that followed. The married couple were happy with the plan and signed the documents.
The married couple left the session with their signed documents with written instructions and related summaries. They were satisfied that these long documents would do what they wanted them to do. They paid a fraction of what it would have cost in another setting.
Years passed, the married couple did not revisit the documents or the lawyer. Their four children were grown. Wife died first. Several years later, after a long period of diminishing physical health and memory impairment, her husband followed. After Husband died, Wife’s three children discovered that during Husband’s long illness, Husband signed a “disclaimer form,” which was allowed in the trust, and a new power of attorney that granted powers to his son. The net result was that when Husband died, there was nothing left in the trust or any retirement account for Wife’s three children. Their only option for any recovery was the possibility of suing their brother.
At Wool Landon, we do not just prepare forms. We develop a relationship with our clients. We view every estate planning document we prepare for you as representing your final words to the people and the charities you love. We want to review and revisit those words with you periodically. Such words are not to be undertaken lightly. They will not be forgotten. If you chose the easiest option, the outcome may not be what you intended. It will be part of your legacy.