Tag Archives: Attorneys

I Can’t Say It Enough…

…good estate planning requires advice from more than one discipline.

I was talking this morning with a friend of mine who is an estate planner.  I haven’t known him for a long time, but I like his approach, and I think it differentiates him from other financial planners I’ve known, because he’s got a passion that you can’t really fake, and it is clearly about doing the right thing for the client.  In this case, it means that he spends a considerable amount of time helping clients protect what they already have before he talks to them about using the wealth they have to accumulate more to fund whatever their end goal is.

I’ve been doing this long enough to understand that not everyone is wealthy, but I think that most people want to build what wealth they have.  Sure, some people have come to see me about their estate planning because they have gotten the bad news from a doctor, and that distant inevitability is now an impending certainty.  A holistic approach is probably not foremost in their minds, but an awful lot of people I’ve represented have more wealth than they think they do, and when we sort that out as part of the process, it often requires consulting with other professionals.  Granted, if we’re doing the estate planning because someone has stage four cancer, then we aren’t likely to be talking with them about life insurance, but we might be talking with them about brokerage accounts, 401(k)s, individual retirement accounts, and their interests in closely-held corporations and LLCs, which means that we will be talking  about transfer-on-death or payable-on-death designations on accounts, and how those designations can impact their estates, which means that we will be talking with their financial planners.  We will be talking about potential tax consequences for various potential courses of action, which means that we will be talking with CPA’s and accountants.  And sometimes, I even end up talking to representatives of charities about gifts that clients want to make.  When I am doing this for the clients who know that they aren’t long for this world, I’m not just sad for the client’s approaching demise.  I’m sad for the opportunities that they lost by not acting sooner.  Sometimes, this is because of procrastination, and sometimes, it’s because people don’t understand that estate planning shouldn’t be a mass of disjointed pieces, but a comprehensive plan, focused on the goals they rate as most important, and executed with a series of coordinated steps which have been considered and mapped out with the assistance of a team of professionals who want to help them succeed.  Once I help clients to fully understand this approach, I don’t often end up having  conversations about cost, because they understand that compared to the return they can achieve, the cost is minimal.

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Filed under Pieces of the puzzle, Planning, Probates and Estates, The Practice

The Bad News Is…

One of the things that law school didn’t really prepare me for was the clients who you can’t help.

When I first started practicing law, I was eager to help clients and potential clients, and there was one who stands out in my memory as the first one I couldn’t help.  He had cosigned on a car for a relative, who had defaulted, and he came to see me, because the bank had come calling on him.  I saw nothing in the documents or the circumstance he described that would permit me to be of any meaningful assistance, but I was slightly worried that he might try to hurt me after I told him that I couldn’t help him.

He was very deliberate as he pushed back from the table, and left the room, never saying a word, and his jaw set like a rock.  After my initial relief at not having to dodge a punch or three wore off, I recall thinking “Well, that’s one person whom I’ll never see again.”

But I was wrong.

Before I moved on from that firm, the man came back to see me two more times.  The next time I met with him, he had a contract he wanted me to review before he would decide whether or not to sign it.  I was delighted that he consulted with me first.  I read through the document, noted a few points that I though he should be aware of, which prompted him to tell me that he was going to think about it before deciding to sign or not.  After wrapping up my notes, I looked up and said “Can I ask you something?”

He smiled and said “Let me guess.  You want to know why I came back.”

I nodded my head and said “Yes.  I could tell you were pretty upset when you left last time.”

He laughed and said “You’re not wrong, but I will tell you that I wasn’t upset with YOU.  In fact, I liked the way that you didn’t sugar coat it, even though you didn’t like telling me that there was nothing you could do.  You were honest with me, you didn’t waste my time, and you told me what I did wrong without making me feel stupid.  I knew I had found someone I could trust, and that makes you worth the money you charge.”

I saw him one more time, when I wrote a Will and powers of attorney for him.  Again, he expressed his thanks for the straightforward advice, and the no-nonsense approach.  I still think of him often, because I still encounter people whom I can’t help.  I won’t say that it’s easier telling clients this now than it was then, but I find that by trying to be respectful of their time, and by trying to not make them feel stupid because they made a mistake, I give them something of value, even if it was only allowing them to leave with the dignity they had when they walked in to my office.  Not everyone reacts well to such news, but I have managed to keep a few of them as clients because I approached their problems in this manner, which turns a negative into a much larger positive.

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Filed under Contracts and Agreements, Empathy, Logic Isn't Always The Life Of The Law, Pieces of the puzzle, Planning, The Practice, Wills

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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Filed under Business Law, Contracts and Agreements, Uncategorized

Will or Trust? A Decision, Not Dilemma.

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.

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Filed under "My Buddy...", Planning, Probates and Estates, Trusts, Wills