Do It Yourself Estate Planning

Forbes Magazine’s September 7 issue had a thought provoking article on “Do It Yourself Wills”.  My WealthCounsel colleague in Montana, Mark Josephson, took the conversation one step further with the commentary he shared.  I hope you find this informative. Josephson begins,  “My Larsson estate commentary and a recent article on Forbes.com regarding the pitfalls of do-it-yourself estate planning,  The Case Against Do-It-Yourself Wills  got me thinking about some additional comments.  I could not agree more with the overall point made in the Forbes article.  I do disagree with some of the details.  The Forbes article talks about the famous Montana court case involving Charles Kuralt (remember he was the famous CBS broadcaster who labeled Montana's Beartooth Highway as the most beautiful drive in America) and his handwritten love letter to his mistress.  In a case that went to the Montana Supreme Court FOUR times, his handwritten love letter was ruled to have given his valuable Montana property to his mistress and to add insult to injury Kuralt's family had to pay the estate taxes due on the Montana property because the handwritten letter did not coordinate with the tax clause of his professionally drafted Will. The article reminded me of another Montana case, The Estate of Dern, in which case Mary and Clifford Dern, who each had children from a different marriage, bought a trust package from a non-lawyer and also attempted to amend it themselves four times -- sometimes having proper signatures, sometimes not.  In the end, the children ended up suing Mary with the case ending up in the Montana Supreme Court.  I think Justice Nelson in that case summed up the whole do-it-yourself thing as best as I've ever read.   He said: Given the facts of this case, it is appropriate to make a further observation. If nothing else, our decision here should serve as a warning of the pitfalls of the "canned," "fill in the blanks," "one size fits all" trust instruments that are increasingly being sold to unsuspecting members of the public, particularly senior citizens, by salesmen, many of whom have no professional qualifications whatsoever and some of whom are little better than scam artists. ... In truth, few areas of the law are more technical, complicated and prone to financial disaster than estate planning and trusts, nor more demanding of the sort of individually tailored advice and assistance that can best be obtained from a competent attorney and tax professional. This case, unfortunately, proves that point.  [my emphasis added]”

From his position on the bench, Justice James C. Nelson of the Montana Supreme Court certainly offered a stern warning on the “DIY Wills”.  The Judge’s views seem to have been formed long before the Forbes 9/07/2010 article, but his sentiments seem to parallel the Forbes article.  I’d like to serve as the ounce of prevention by serving as your “competent attorney” that the Judge refers to in his above commentary.   

Estate Planning Traps

This is a helpful bit of information that my fellow estate planning colleague, Mark Josephson, posted from his law offices in Montana.  He’s relatively new to blogging, but I think he’s done well with this information in a summary format.  I am reposting his information to share with you. 

I seem to be on a roll this morning over the pitfalls of do-it-yourself estate planning.  Here is list of Common Pitfalls and Traps I've had in my basic estate planning handout for clients:

1.  “I’m too young to worry.”  Reality: If you die young with a spouse and/or children you need to protect your loved ones.  Also, by planning early you have the power of leverage/appreciation.

2.   “My estate is too small.”  Reality:  If not planned, a smaller estate can suffer greater percentage shrinkage than a large estate due to increased administration costs necessary in a non-planned estate.

3.   “I’m leaving everything to my spouse, so estate tax doesn’t matter.”  Reality: Leaving everything to a spouse just postpones tax and wastes the dead spouse's estate tax “coupon”:  Wasting a coupon meant wasting $1,575,000 in tax savings in 2009.

4.  Believing one size fits all.  Corollary: You get what you pay for.

5.  Not paying attention to who you have on what and how: Beneficiaries of life insurance, annuities and retirement accounts.  Wrong people get the wrong property.

6.  Failing to consider trusts as vehicles to pass wealth during life or at death.  Convenience trusts, irrevocable life insurance trusts, “Crummey” power trusts, intentionally defective grantor trusts, GRATs, QPRTs (for cabins or vacation homes).

7.  Not planning for your disability; not avoiding a “living probate”.

8.  Not having any will or trust, handwriting it yourself, or having them prepared without proper analysis for your situation.

9.  Too much in joint tenancy with right of survivorship; disproportionate ownership by husband & wife.  Joint tenancy is convenient but it can ruin an estate plan if not used correctly.

10.  Failing to name guardian of minor children.

11.  Failing to prepare business succession plan.

12.  Failing to plan for estate liquidity and/or tax payment alternatives.

13.  Having too little life insurance.  If you, the money maker dies, what is your family going to live on?  Often life insurance is the only affordable way to solve the problem.

14. Not realizing life insurance you own on your own life is included in taxable estate for federal estate tax. While the proceeds may be income tax free, they are not necessarily estate tax free if you own a policy on your life.

15.  Not considering lifetime gifting program:  Children, grandchildren, charitable techniques.

16.  Not considering alternative operating entities.

17.  Procrastination:  Letting indecision lead to inaction.  Usually, doing something is better than doing nothing.  See my post below on How to Avoid Vapor Lock

18.  Lack of Communication.  While your estate is private, you should discuss matters with those you intend to have care for you or handle your affairs after your death.  Often better planning happens when the younger generation is included and aware of what's going to happen.

19.  Not keeping estate plan up to date.  You should review your estate plan at least every few years. 

20.  Believing a magic bullet exists or “This won’t happen to us.” 

21.  BEWARE of “constitutional,” “pure,” or “common law” trust schemes. 

Remember:  If it sounds too good to be true, it is.

 

I enjoy having Mark as a colleague.  For your information Mark does good work, and his firm, Josephson Law Firm,  has received the highest rating through Martindale-Hubbell and is listed in the Bar Register of Preeminent Lawyers.  Additionally, Mark Josephson has recently been selected by his peers for inclusion in the 2010 edition of The Best  Lawyers in America.® 

If you have questions about any points Mark makes in this post, please leave them as a “comment” below, or call my office.

 

"Dragon Tattoo" Estate Drags On

A recent post by fellow estate planning attorney, Greg Turza offered an interesting commentary illustrating the need to clearly identify who your heirs are.  I hope you find this an interesting story about this famous author and his death without a will.  

Stieg Larsson, the author of the best selling novel “The Girl with the Dragon Tattoo” (now a movie), died in 2004 without a will. His heirs are still fighting it out with Larsson’s live-in girlfriend of 32 years. She and Larsson never married which leaves Larsson’s heirs as the sole beneficiaries of his estate.

Swedish law is the same as many states on this issue. If you die with no spouse and no children your heirs are your siblings and your parents. In Larsson’s case this means his father and his brother. Apparently, the basis for the girlfriend's claim is that she was involved in the editing of his novels. For more details see the story here.

You may be surprised to see who your “heirs” are if you died without a will. It depends on the relationships you have by blood or marriage who survive you. To determine who your heirs are under our state laws, you might want to spend a quick hour with me to get up to speed on this.

One other interesting aspect of the case is that all three of Larsson’s novels were published after he died so the value of his estate at the time of his death was probably nil. But as it turns out, even if he had great wealth at the time of his death Sweden repealed its estate tax in the same year of his death, 2004! If only the United States would follow suit.

If Steig Larsson had spent an afternoon with me, he would have avoided many of these problems.  And the lives of his heirs would have been considerably less stressful.  If you want to avoid Steig Larsson’s fate, please contact me, and let’s meet.  If you’d like to read Larsson’s trilogy, you can find it here:  Millennium Trilogy.