Category Archives: Uncategorized

A New Year Brings New Opportunities

Estate Planning isn’t a “one and done” process.

It would be easy to respond to this assertion by saying “You’re just trying to stay busy.”, and you’d be right, but the fact is that people’s circumstances will change, and often do.  If their estate plans don’t reflect these changes in circumstance, it can sometimes cost their estates far more than it would if they had spent a little money and time making the necessary changes.  The nature of these circumstances will dictate how often people should review and make changes to their estate planning.

Clients of modest means generally don’t have to make frequent changes to their estate plans for financial or tax planning purposes, and this has been the case for a while now with federal estate tax thresholds that have been quite high in comparison to the average person’s estate.  When I recommend changes to clients in this financial category, it usually is due to the fact that a considerable amount of time has passed since their existing Wills and other documents were prepared, and now children are no longer minors in need of guardians, and designated personal representatives and alternate beneficiaries have passed away, or the principal has since divorced and remarried, which may or may not call for something a bit more complicated than what they previously had, depending on their goals and objectives.  These are generally people who may have executed estate plans ten or more years ago, and may alter them once or twice throughout their lifetime, to acknowledge kids becoming adults, persons nominated in various capacities getting older or passing away, or changes in the value of their own estates due to inheritances from other family members.  I may recommend changes to durable and medical powers of attorney more frequently than I will for changes to Wills for many of these people, because entities who rely on these documents (banks, hospitals, brokerage houses) seem to constantly be increasing specific delegations of authority, despite the fact that the enabling statutes contemplate broad, general grants of authority.

For people who have more substantial wealth, I recommend reviewing your estate plans much more frequently, as their wealth tends to compound and accumulate much faster, often putting them in a position of needing to have integrated estate and tax plans in order to avoid unnecessary taxes at the time of death.  This means weighing various options, as complexity can go up, and direct control goes down when utilizing tax mitigation strategies.  These are conversations that need to include accountants, as well as the attorney, because mistakes can be costly, and integration is important.

In closing, change comes to every life.  Sometimes the changes are big.  Sometimes they are small, but they are cumulative.  Births, deaths, divorces, inheritances, windfalls, “the magic of compounding”, and divorces are all changes which should prompt you to make an appointment with your attorney to discuss whether or not you should change your estate plans, and if so, to what degree.   Is it a simple codicil to your Will, or is it starting all over and  adding trust provisions?  Attorneys, and sometimes accountants, can help you answer these questions, and maybe help you save a considerable sum of money and heartache for your loved ones.

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Commercial Leases: The Devil Really IS In the Details

I’ve often heard other lawyers talk about how lawyers have a sickness.  I’m not sure that I would characterize what makes attorneys different as a sickness, but I will admit that we often seem weird to non-lawyers, and that this weirdness manifests itself in mundane ways.  My most obvious manifestation involves commercial leases.  How so?  Because I actually enjoy reading through them.  In fact, I’ve admitted publicly that being handed a commercial lease to review is like “Where’s Waldo?” for me.  I get out a pencil and my notepad, and I go to work.

Being a “country lawyer”, I don’t get to review the super-complicated, hundred-page plus leases that some attorneys get to build their careers around, but it isn’t unusual for me to be handed a commercial lease which is 30 to 50 pages long, and I have drafted some of similar length for clients.  The key is understanding that it really does take that many pages to include the “boilerplate” that you should expect in every commercial lease.  The problem is that I often discover that everyone takes the boilerplate for granted, and no one bothers to read through it carefully and determine if it makes sense for the individual tenant.  Hazardous materials clauses are a staple of commercial leases, and with good reason.  Environmental cleanup costs are very expensive, many owners policies limit the  but too often, landlords fail to think through the effect of whatever language is in their boilerplate, and the clients either don’t read carefully enough to know if they have a problem.  Many clauses broadly define “hazardous materials”, and if the lease does not narrow the definition, or make exceptions for materials commonly used by certain businesses, then a landlord may put a tenant in a position where the tenant is in violation of the lease from the moment they commence operations.  Perhaps the most obvious example came when I was asked to review a lease for a nail salon.  The hazardous materials clause was broadly written, and the tenant was shocked when I informed them that since they use acetone, they would technically be violating the lease.  In that case, the landlord was just as shocked as the tenant, and was willing to include an exception for acetone, and some other products that the salon used.  This is why patience in reviewing, along with careful note taking can help a tenant avoid nasty surprises like this which may be lurking in plain sight.

I also spend a fair amount of time with commercial leases looking at issues regarding Certificates of Estoppel.  Put simply, a Certificate of Estoppel is a certification by the tenant to a third party of certain facts regarding the lease.  The facts usually involve the length of the lease, whether or not either party is in default, the amount of the rent, or whether the tenant is currently insured as is required by the lease.  It is a subject that should not be an issue, but it frequently is, because landlords, or their banks will often ask tenants to certify things which aren’t true, or do not comport with the lease, which would have the effect of rewriting the lease moving forward, and maybe eliminating any remedy for violations or duties owed by the landlord which the tenant would otherwise be entitled to demand.  Another common error with Certificates of Estoppel occurs when the lease specifically limits what the tenant may be asked to certify, but the landlord (or a creditor of the landlord) asks the tenant to certify something outside of the specific scope defined in the lease.  This frequently occurs when a bank  or other lender has taken over possession of a property, and seeks to rewrite certain lease terms.  I no longer think that these occurrences are accidental.  I’ve spent too much time talking to representatives of banks or other lenders who clearly have a copy of the lease in front of them, and yet they ask, or more often demand, that the tenant certify something outside of the scope limited by the lease, or that otherwise is different than what the lease requires.

Finally, insurance clauses, in concert with indemnity and hold harmless provisions, require specific diligence in review. Many commercial transactions involve burden shifting, and the party with more bargaining power will shift as much liability or potential liability as they can to the party with less power.  This isn’t unusual, and I expect that, but every now and again, I get a lease where someone has gone overboard, and requires the tenant to accept certain liabilities which may or may not cause them to violate provisions of their insurance policies, or even void their insurance policies, which would leave the tenant legally liable and without any recourse against their own insurers for any recovery or contribution.   This is a problem when it involves a small business that doesn’t expect to make a lot of money,because they will often have NO bargaining power to change this, and don’t want to spend any money to even properly understand what it means for them.  But when I’m dealing with larger companies, I will sometimes arrange to sit down with the client and their insurance agent to discuss the specific wording of these clauses, and let the client hear directly from their own agent why the wording of these clauses will create problems with their coverage if it is not changed, and we will make detailed counter-proposals for alternate clauses which won’t leave them bare in the face of potential liability.

These kinds of pitfalls are why if you are looking at signing a commercial lease, it makes sense to hire an lawyer with my particular brand of weirdness to spend a few hours reviewing the lease, and then going through it with you.  Yes, it requires an outlay of capital, but it doesn’t cost as much as voiding your insurance coverage or rewriting a lease to the benefit of your landlord’s creditors.

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Incongruities

Pencil

Yesterday morning, as I was getting dressed and thinking about my slate of meetings for the day, I decided to put a pencil in my pocket along with a pen. Normally, I wouldn’t devote any thought to this action, but as I picked up the very beautiful Parker Duofold I inherited from my father, I paused, and reflected on the significance of it.

My father was a science teacher by trade, and you might think that being a teacher, he wouldn’t have any ambivalence towards the humble pencil, which allows the holder to convey thoughts to paper, and to refine those thoughts through judicious use of the eraser. However, even my earliest memories of him helping me with my homework contain various echos of him complaining about my use of a pencil. When I grew older, I think when I was in junior high school, I asked him why he didn’t like using pencils. His response was typical for my father, who was a man of few words:

“Because the very act of using a pencil implies that you will make a mistake.”

Even then, I appreciated the brevity and confidence embodied in that simple sentence, but I didn’t share the sentiment. I could say that it was my own contrary nature, which is a trait which I can directly attribute to both him, and the paternal line of my family, and while it would be partially true, the more honest answer was that I reserved brash confidence for the things I was absolutely sure of, and my experience in school was that I still made mistakes.

As I grew older, and my education progressed, my confidence and skill both appreciated, but I never lost my affinity for the humble pencil. I used them for tests. I used them in drafting class. I used them in band. I used them when I wrote papers. And I used the eraser, right alongside, even if I used it less frequently as time wore on, without giving a serious thought as to why I did so. It wasn’t ever in the forefront of my mind until one of my first classes in law school when a professor made it clear to me why I still used a pencil, even as I rapidly and efficiently scrawled lecture notes in ink in pages of the notebook before me. He waited until everyone was seated and quiet, and like a performer, realizing he had the complete attention of his audience, he reached into his pocket, and pulled out a yellow No. 2 pencil, and held it above his head so that everyone could see it clearly. Without stopping to clear his throat, he announced to the quiet lecture hall “As attorneys, we think with these.”

To be completely candid, I couldn’t tell you what he said after that, because I was still absorbing his statement, and considering its implication. Suddenly, it became clear to me. I didn’t use pencils because I expected to make mistakes; I used pencils because any initial thoughts committed to paper can always be refined and improved upon.

And this, more than anything else, is why I still use pencils.  Even now, when surrounded by the ubiquity of desktop computers, laptops, tablets, and smart phones, I often use pencils to make initial thoughts better.  Pixels are nice, and the delete and backspace buttons work as well as any eraser, without need for replacement, or pesky soiled shavings, but they don’t have the same sense of timelessness, or feeling of gravitas that handwritten words, pressed into paper, seem to carry.  A pencil is portable.  It never needs to be plugged in.  A virus can’t wipe out what you’ve written with a pencil.  Malware cannot hold its work product hostage.  I can use a pencil anywhere.  I refine phrases and words, and increase clarity. I can use a pencil to distill ideas their bare essence. And I relish the promise and potential of a blank notepad and a pencil, as the anticipation of what might flow out of my mind and on to that paper builds slowly in my stomach and the small of my back.

I reflected on this journey of realization, as I regarded the beautiful mechanical pencil in my fingers, and then the question occurred to me: How is it that a man who rejected the implication implicit in the use of a pencil came to own such an ornate one?

I pondered it for a few moments, as my eyes drank in the sheen of the mother-of-pearl body, and the shine of the brass cap, which is engraved with his initials, KLW. And then it occurred to me. The eraser was under the cap, which is not at all easy to remove. It isn’t a writing utensil that you would use if you anticipated making mistakes.

Well played, Dad. Well played.

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Organ Donations As Part of Estate Planning

For many years now, I have been asking estate planning clients if they would like to be organ donors.  The intent of the question is to find out if they would like to be general organ donors, donating whatever organs can be used for transplant at the time of their death.  When clients answer this question affirmatively, we will give them some instructions for getting in contact with the organ donor registry if they haven’t already marked their driver’s licenses as being organ donors.

However, a short time ago, we had a client ask us a question we had never been asked before:  “Can I make a specific bequest of an organ in my Will?”

It wasn’t a question that I could answer right away.  Because of the sensitive nature of organ donations, and the public interest in not wanting to foster a business in organ harvesting, I guessed that if it was permitted, there would likely be a whole host of rules to be followed as part of the process, and I was right.

However, as it turns out, the answer is “Maybe, under certain circumstances.”

The Washington Revised Uniform Anatomical Gift Act, RCW 68.64 sets forth the procedures for making anatomical gifts, including specific bequests of organs.  The statute does permit a donor to make a specific bequest of a specific organ to a specific person, provided that the rules set forth for doing so are followed, but if the named recipient is unable to make use of the organ, it will pass to the next appropriate organ or tissue bank, or organ procurement organization.

Because there are a number of formalities to be observed and steps to be taken in order to correctly make a specific bequest of an organ, and additional steps to be taken if the donor’s driver’s license or state issued identification card already denotes the donor as an organ donor, I cannot recommend enough meeting with an attorney to help make sure that the gift the donor wishes to make will be directed to the appointed person.  This is especially important as the statute exempts parties and organizations from liability for action taken in good faith attempts to comply with the statute.  This means if a donor registry is unaware of a specific bequest made in a donor’s Will, and it gives the donated organ to a person other than the named beneficiary, it is unlikely that it can be held liable, absent gross negligence or some other factor that would counter a good faith claim.

Now that I know the answer to this question, I’m looking forward to another client asking about this option in estate planning.

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Do You Need To Probate That Estate?

This is a question I answer almost daily.

In the state of Washington, if the deceased owned real estate, or they owned probate assets worth more than $100,000.00 at the time of their death, then yes, their estate should be probated.

I often encounter a great deal of reluctance to probate an estate when I am dealing with people who have lived in other states…often with good reason.  However, in Washington, probating an estate can actually offer the survivors and beneficiaries greater certainty and finality than not probating, and we can often complete the process in six months or less, unlike in other jurisdictions.   Probate is also the only way in many cases to transfer title to real estate owned by the deceased.

If the deceased’s probate estate is worth less than $100,000.00, and they did not own real estate, then it is possible to collect and distribute the deceased’s assets to the heirs and beneficiaries without probating the estate.  This is accomplished by preparing an Affidavit of Successor in which the affiant swears (a) that it has been more than 40 days since the decedent passed away, (b) that no one has started any probate proceedings, (c) that the affiant is a “successor” of the decadent as defined by statute, (d) that the estate is worth less than $100,000.00, and does not include real estate, and (e) lists the estate assets and approximate value of each asset.

When dealing with the estate of a deceased spouse who executed a Community Property Survivorship Agreement with the surviving spouse when both were living, probate can also be avoided on the death of the first spouse by recording the Community Property Survivorship Agreement in the records of the county of residence, along with a death certificate.  However, depending on the size and the complexity of the estate, there may be reasons to probate the estate anyway.

In any event, I recommend discussing the individual circumstances with an attorney before making a decision on whether to probate or not probate, as one fact will often change the advice given when dealing with similar estates.

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