When I am doing estate planning for clients, often my biggest obstacle is someone I’ve never met. That person is “My Buddy…”
I’ve discussed this person with attorneys who practice in other areas of law, and surprisingly enough, “My Buddy…” has often contributed free advice to their clients as well. And as with my clients, the advice given to their clients by “My Buddy…” is usually worth every penny.
That said, I don’t worry about it too much. Sometimes it means having to take a few extra minutes to explain things, and maybe draw some diagrams outlining various options and outcomes, but I know that I’m lucky in this respect. “My Buddy…” better hope that some of the family law attorneys I know never catch up to him, because his advice has made their jobs exponentially more difficult, especially since in the context of divorce cases, clients frequently put a lot more weight on the advice and counsel of “My Buddy…” than they do on that provided by their own attorney. In the context of estate planning, “My Buddy…” often has often told my clients that they need to have a trust, so they can “avoid probate”. I don’t encounter this as much as I used to, but occasionally, I still take an appointment with someone swayed by “My Buddy…” and his bar stool lawyering, or worse yet, someone who was taken in by the smooth sales pitch of a “trust mill” in the 90’s, and has a nice looking binder full of tabs, separating various documents, which often fail to accomplish what the owner believes they were told they would when they hired a fly-by-night outfit to prepare a cookie-cutter set of documents, dress them up in a nice package, and then do zero follow-up, ensuring that an expensive package prepared to “avoid probate” ends up…going through probate.
Because of “My Buddy…” (or trust mills), I frequently meet with people who announce early on in the appointment that they need to have a trust, so they can avoid probate. When this occurs, I usually put my pen down, look them in the eye, and ask them why that is. Sometimes, they explain that they need to avoid probate because it is a horrible and time-consuming process. Sometimes, they can’t tell me why, but they are certain that this is true. And sometimes, they believe that it will result in a tax savings when they pass away. Depending on the client’s response to the first question, my reply is some variation of the following:
I’m not sure what state you may have lived in prior to Washington, but here, probate is not a big deal. The process is fairly streamlined, and if the heirs all get along, don’t burn the estate down fighting over it, and there aren’t any oddball assets creating valuation issues, or other items that are out of the ordinary, the estate can be wrapped up in 6 or 7 months, and it really can be done fairly inexpensively (at which point I quote a price range that is much less than the tale of lamentation relayed to them by “My Buddy…”. Probate also has certain statutory mechanisms that can allow you to legally cut off certain claims against the estate after a set period of time which are not available with trusts.
As for tax savings, if your estate is large enough to meet the state or federal estate tax thresholds, there may be some ways to achieve tax savings without bothering to prepare a full-fledged trust agreement, and going through all the effort necessary to complete transfers to the resulting trust so it accomplishes the goal of avoiding probate.
At this point, I ask them a series of questions to determine if there is a good reason, or a need for a trust agreement, rather than a Will. If they own real estate outside the state of Washington, then they should consider a trust agreement, most likely a revocable living trust, to own that real property, in order to avoid the need to go through probate in the state were the real estate is located, as well as in Washington. If their estates are large enough to meet the state and or federal estate tax thresholds, then a trust agreement may be appropriate, although they may be able to achieve tax savings with a trust will. If they have heirs who have disabilities and who receive state or federal assistance, then we may discuss a special needs trust or a supplemental needs trust in order to avoid disqualifying that heir for further assistance with an outright inheritance. If they own a business, or several businesses, then there may be reasons to consider a trust agreement, especially if not all the intended heirs are interested in owning or running the business. And if they are just very private people, and they do not want the descent and distribution of their estate to be part of the public record (even through much of the financial data is no longer submitted into the court record), then a trust agreement of some type might be the best option for them.
That said, much of the value of working with an attorney to do your estate planning instead of relying on the dubious advice of “My Buddy…”, or worse yet, a form service like Legal Zoom, is that a good attorney should ask a lot of questions, so he or she can be certain of preparing the right documents in the correct manner to accomplish your intended goals, AND the attorney should then be following up, so that assets are properly transferred. This helps to prevent a surviving spouse or heirs from facing the added burden of learning that documents were not correctly prepared, and they have to take actions they never intended. And if your estate is complicated, or has a tax problem, a good attorney will also work with your accountant or CPA to make sure that the course of action you choose makes sense financially, and if it doesn’t, you are made aware so you can make an informed decision. Working with an attorney on estate planning may end up costing a little bit more than just buying some forms, or drafting your own with the assistance of “My Buddy…”, but the peace of mind is worth every extra cent paid.