No Wills, Old Wills, Trust Mills and other Estate Planning Ills

In estate planning consultations, I often tell clients that for most people, having no estate plan is better than having a badly drafted or very old one. North Carolina probate law contains default provisions for those who die “intestate,” or without a will (or trust). Those defaults are designed to require distributions of estate property to the decedent’s family, divided between the spouse and any children or grandchildren, ensuring the assets stay in the family.

While there are many problems with intestate succession (e.g. leaving some assets to children even though your spouse survives, leaving assets to children or grandchildren who you may wish to disinherit, or leaving assets to a beneficiary in a way that exposes them to creditors), for most people they are problems that pale in comparison to the more serious ones that arise from out of date or poorly drafted plans.

An old plan may leave all or most of an estate to the wrong person, someone with whom the decedent had since fallen out. A badly drafted plan may set the stage for litigation by naming two or more children who do not get along to serve together as fiduciaries. Bad planning can “blow up” an IRA or put assets through probate that normally are exempt and expose those assets to unnecessary fees and possible loss of protection from creditor claims. One will I recently reviewed attempted to disinherit a spouse without taking account of North Carolina’s elective share statute, which grants a surviving spouse rights in a portion of the deceased spouses estate, regardless of what a will or trust provides, in most circumstances.

While plenty of attorneys are culpable of these sorts of estate planning mistakes, among the main culprits are “Trust Mills,” non-attorney businesses that sell estate planning products or make attorneys available on-line for limited advice at extra charge. If estate planning is designed to provide peace of mind and assurance that hard earned assets will be the distributed the way you want, can you really trust a do it yourself estate plan with limited or no professional advice? The problem is not knowing what you don’t know. What’s worse, many such trust mill businesses use the sale of estate planning documents as a vehicle to sell insurance or annuity products, and several have been sued, for instance for “consumer fraud, deceptive trade practices and deception against senior citizens […] home solicitation violations and breach of fiduciary duty and […] unauthorized practice of law.”

http://www.startribune.com/state-accuses-shorewood-firm-of-trust-mill-fraud/243385581/

But even where trust mills have avoided lawsuit, they may be making estate planning messes. One famous CNBC commentator, financial advisor and purveyor of “quick n’ easy” estate planning offers a $90 package for a Will, Revocable Trust, Financial Power of Attorney, and Durable Power of Attorney for Healthcare.” The website exclaims: “It’s like having your own financial planner and personal trust attorney at your fingertips!” But is it really like having a personal trust attorney at your fingertips?

The problem with the boilerplate living documents is that estate planning is not a one-size fits all package. It is a process, and proper estate planning must take account of an individual’s unique circumstances in ways that one-size-fits all forms do not. How do you provide for special need children or grandchildren? How does the family business fit in? What to do with your IRAs? And how do you protect them from underage, incapacitated or spendthrift beneficiaries? How do life insurance policies fit into estate plans? What about pay on death titling on bank accounts or survivorship titling on real estate? What happens upon the incapacity of trustee? As one estate planning attorney describes his practice, “the documents are free, it’s the advice that we sell.”

In truth, estate planning is not just slapping some directions on paper about who gets what when you die. Estate planning is a way to ensure that you are properly cared for during incapacity without a court-supervised guardianship, that your assets are protected from embezzlement if you are vulnerable, that you avoid paying unnecessary taxes or probate expenses, that no fights or litigation arise in the wake of your death, and that your assets ultimately pass to your intended beneficiaries in a protected fashion, safe from creditor claims, divorces and estate taxes.

Proper estate planning is about taking care of yourself and the ones you love, and may have profound implications for quality of life. If you have taken great care to live prudently during life, do the same with your estate planning.