Brian's Blog: Thoughts on Estate Planning, Business, Asset Protection, Family & California Life

Why Does the Cost of an Estate Plan Vary So Much from Attorney to Attorney?

People frequently ask me, "Why does the cost of estate planning vary so much from attorney to attorney?"  It's a good question. 

Many folks have become convinced that one living trust is pretty much the same as another.  The only difference, they think, is price. 

The truth, however, is that all living trusts are not the same.  But the misperception that they are has affected how most attorneys work.  It has also affected what they charge. 

And there is real pressure to charge less.  Unfortunately, the only way for an attorney to do that is to ratchet up the volume of documents they produce each week, shoe-horn their clients into one-size-fits-all plans, avoid focusing on quality, and neglect the follow-on services and communication necessary to make sure those plans actually work when they are needed. 

Without knowing it, most estate-planning attorneys have become little more than sellers of pre-printed stationary.  To one degree or another, they have stopped practicing law and given in to all of the misinformation that's out there about living trusts. 

But I did not go to law school to learn how to sell you a stack of paper with generic legal writing on it.  I became a lawyer to make a meaningful difference in my clients' lives. 

After all, your estate plan is how you tell your family that you love them for the last time. If your plan creates a big mess for them to deal with, what does that say to them about your affection?  And what does it say about your lawyer? 

That's why we put so much effort into creating the highest quality estate plans for our clients.  More importantly, it's why we build a lifelong relationship with them.  We want to be there for their loved ones if our clients become incapacitated or pass away.  Our clients love that about us, and we appreciate them for caring so deeply about their families.

Sadly, I only know a few estate planning attorneys who still practice like we do.  (What we charge for our services is very competitive with these excellent lawyers.) 

At the same time, I review a lot of trusts put together by those attorneys who have become nothing more than document sellers.  People typically bring these trusts to us because they haven't heard from their lawyer in more than 10 years.  They suspect, and rightly so, that their plan no longer fits their lives, their families, and their finances. 

That's bad.  But it gets worse.... 

Their plans also haven't kept up with the law.  If they become ill, new privacy laws will prevent their successor trustee from taking care of them.  (That means a court will have to declare them incompetent in a public hearing and, sometimes, even establish a costly conservatorship.)  Plus, their decade-old estate-tax planning is horribly inflexible and based on complicated formulas that will make the surviving spouse's life miserable.  They will have no ability to reassert control over their estates should they recover from an incapacitating illness.  The inheritance they leave to their loved ones could be lost to lawsuits, divorce, creditors and unnecessary estate taxes.  (It doesn't have to be!)  Their medical powers of attorney may have expired.  Their assets will go through probate because they haven't been properly put into their trust.  I could go on and on about how document-seller trusts end up going bad over time.

If you have an old estate plan, please don't go to a document seller to get it "redone."  You'll just have to have it "redone" again in about 10 years by a completely different lawyer, assuming you are alive and have legal capacity to make changes at that time.  The process of constantly starting over will probably cost you more over the long run than hiring a lifelong advisor would.  And the planning won't be nearly as good.   

If you want the latest and greatest planning, if you want it to work when it's needed, if you want to save money over the long run, if you want the attorney you've chosen to be there for your family when you can't be, and if you want real peace of mind, find a lifelong advisor whom you like -- whom your loved ones will like -- and make the investment.  You and your family are worth it. 

© 2008 Brian D. Wyatt, A Professional Corporation (All Rights Reserved)

Why You Should Talk to Your Parents about Their Estate Plan over the Holidays

Do you know what kind of estate plan your parents have?  The holidays can be a great time to figure that out together.

You see, if you buy a car, you'll know whether you got a lemon in no time.  But when will you know whether your parents' estate plan is a “lemon”?  Probably years from now, when one of them becomes ill or disabled or passes away -- the very time when you and your family most need it to work -- and when it may be too late to fix!

Don't get me wrong, it's great to have an estate plan.  And if your parents have one that includes a living trust, their plan may be just fine.  The problem is, once your parents set their plan up, it just sits innocently in their home or safe-deposit box. It doesn’t require much (or any) annual paperwork. It doesn’t affect their income taxes. It doesn’t restrict their use and enjoyment of their assets. So, they probably just put the plan out of mind.

That's what’s so dangerous.

Has your parents' estate plan been kept up-to-date with their wishes?
Does it reflect the current needs and circumstances of their loved ones (including you)?
Has it been updated for changes in the law?
Does it reflect the newest planning strategies?

Why am I making a big deal out of this?  Because I regularly review estate plans, including living trust plans, that contain multiple defects!  These defects are the kinds that may someday cause you and your family needless suffering, as well as unnecessary court fees, attorneys' fees, taxes, and exposure to the claims of in-laws, ex-spouses, and other unprincipled parties.

If at all possible, please don't let your parents' estate plan (or lack of a plan) remain a disaster waiting to happen.  To help you get the conversation started this holiday season, here are nine points you should raise with them:

1)  Will your parents' plan protect you and their other loved ones from losing their inheritance to divorces, lawsuits, creditors, and government claims?
2)  Does their trust use a special legacy provision to build your family's wealth, free of unnecessary estate taxes for many generations?
3)  Does their plan permit whichever parent lives longest to save (potentially) thousands of dollars in unnecessary capital gains taxes?
4)  If your parents are married, does their trust contain the right kind of "A-B" language to avoid unnecessary paperwork and fees for the survivor?
5)  Are their health care documents and their living trust properly updated for recent laws called “HIPAA” and “CMIA” -- so the person they've named as their Successor Trustee can act promptly when they are ill or disabled, rather than be forced to go to court?
6)  Do they have a simple, but invaluable, emergency card that will make their health care documents available to any hospital where they are admitted?
7)  Are their IRAs and company retirement plans protected by their living trust alone?  (Note, thanks to recent IRS rulings, it's possible to make these accounts into the largest asset they'll leave to the next generation.  Without proper advance planning for their accounts (even if they are just $150,000 accounts), your family could lose millions in potential wealth.)
8)  Does their trust have the flexibility to adapt after they are gone to new tax laws and the ever-changing needs of their beneficiaries?  Or could their trust simply fail to work the way they intended?
9)  Have they heard from their original estate plan attorney recently?  If not, how do they know that person is actually representing their best interests?  Will that person really be someone you want to work with if something happens to your parents?  I don’t mean to be cynical, but is their old lawyer actually hoping that your parents won't update their plan?  If they don’t, and if that lawyer is still around, you may end up paying him or her a ton of money to deal with any big messes.

All estate plans, all living trusts, and all lawyers are NOT equal.  Many estate plans fail because they simply aren’t maintained or kept up-to-date.  Is the one your parents have (or are thinking about getting), really going to do what they want it to do?

If your folks would like to know more about having their plan created or reviewed, please have them contact us.  We would love to see if they are a good fit to work with our firm.  Mention this blog article by January 31, 2008, and we won't even charge for a review (or an initial consultation).

Seven Steps Every Parent Should Take to Protect Their Children in This Crazy World: A FREE September Workshop in Roseville

I can't believe it, but 74% of U.S. parents don't even have a Will to provide for the care of their children if they died today.

And, of those who do have a Will, most of their kids would still spend some time in foster care if their parents couldn't care for them.  Why?  Because a Will just doesn't cut it.

Of course, as our clients know, it doesn't have to be this way.

Our office is hosting a FREE workshop for parents, especially those who have children under ten years of age.  The topic is "Seven Steps Every Parent Should Take to Protect Their Children in This Crazy World."  Specifically, we'll cover:

• How to GUARANTEE that your children won't spend any time in a foster home if something happens to you.
• How to completely AVOID the lengthy, complex and costly (5% of the total value of your assets) process of probate court, and make SURE that your children get immediate and supervised access to any funds you leave them.
• How to prevent any a relative you do NOT want looking after your kids from getting involved if something happens to you, all while avoiding any embarrassing or uncomfortable confrontations.
• And a lot more....

Although there is no charge for the workshop (a $297 value), there are only 60 spots available.  Because you are a reader of this blog, we would love to see you there! 

Every family that attends will receive a FREE Kids Protection Kit.  The Kit normally sells for $397.  It has all of the legal documents you need to guarantee your kids would never be taken from your home if anything happened to you.

The workshop will be held at the brand new Pump-It-Up! indoor play area in Roseville.  That means parents can bring their children to play while they learn about critical planning strategies they can implement right away.  The kids will have a really great time under the watchful supervision of the Pump-It-Up! staff. 

There are two dates to choose from:  Thursday, September 20th, from 6:30 p.m. to 8:00 p.m. and Sunday, September 23rd, from 4:00 to 5:30 p.m.  For more information and to register, click here.

Alternatively, you can call our office during business hours at 916-273-9040, or call our toll-free, automated registration line 24/7 at 1-888-469-9288.

But hurry, space is limited! 

(If you have any friends or colleagues who don't have a plan in place to protect their kids, please take a minute to tell them about the workshop. Again, more information and a registration form can be found here at our website.)

Strict Medical Privacy Laws: Why We Should Review Your Parents' Estate Plan Sooner Rather Than Later

It's so unpleasant to think about something happening to our parents.  Although I deal with disability and end-of-life issues every day, I certainly don't like to think about my own parents needing a trip to the hospital. 

But what if something did happen?  What if your mom or dad did have to go to the hospital?  Due to a federal privacy law passed in 1996, there's a good chance you wouldn't be able find out what's going on if you call a hospital where they are admitted.

The 1996 law is the Health Insurance Portability and Accountability Act (also known as "HIPAA").  Congress intended HIPAA to curb privacy abuses relating to Americans' personal medical information.  Who wants their medical data broadcasted to the world, right?

Well, the law caused some unintended consequences.  As required by HIPAA, the U.S. Department of Health and Human Services issued a ton of rules and regulations interpreting the law.  There are now so many rules and regulations that it's very difficult for hospitals to know what their obligations are.  So rather than risk severe penalties for violating HIPAA, hospitals and their staffs routinely refuse to release medical information to just about everyone not covered by a patient's written release. 

That's a big problem.  If your parent is in the hospital and hasn't listed you on an official HIPAA release, the hospital staff probably won't answer any questions when you call.  They might not even tell you that your parent is a patient, and good luck if you actually need to access their medical records! 

A colleague in southern California recently told me about a client whose mother did not have a HIPAA release.  The mother was hospitalized at a major HMO and put on a respirator.  The daughter, my colleague's client, wanted to move her mother to a care facility where she would be weaned off the respirator and have a greater chance of recovery.  Due to HIPAA restrictions, it took three weeks for the HMO to get the necessary paperwork to the daughter.  By that time, her mother had passed away.   

If your parents did their estate planning in the 1990s or earlier, or if they just didn't go to a very good planner, they probably never executed a HIPAA release.  It simply isn't enough that you're listed as decision maker in their health care directive, living will, or power of attorney for health care.  You've actually got to have permission to talk to the hospital and access their records.

Let me encourage you to have your parents make an appointment with me to talk about their plan.  There are probably a lot of things in there that need adjusting or updating, including some things that could protect the inheritance they will eventually leave for you.  We provide a current HIPAA release with every estate plan we do, including plans we amend or restate.   

Incidentally, the complex HIPAA rules are an example of how the law relating to estate planning can change and catch people by surprise.  It's why we keep in touch with our clients regularly and review their estate plans without charge every three years.  We want our clients' plans to work when they are needed. 

If you'd like to know more about HIPAA and the risks it creates for yourself and your loved ones, click here to read about it in the July 3, 2007 edition of The New York Times.  (You may need to register to read the article.) 

Will or Living Trust: Which One Is Better for You?

If you live in California and own a home or have at least $100,000 in assets, you should probably have a living trust, not a Will.  Here’s why . . . .

Having only a Will means your loved ones will have to hire a lawyer and go to probate court to get their inheritance.  In other words, where there's a Will, there's a probate. 

Probate in California is a tremendous hassle and should be avoided for three main reasons.

First, probate typically takes 12 to 16 months minimum.  That's a lot of time to have to spend interacting with a lawyer.  (Even I shudder at that!)

Second, because probate takes place in open court, everyone will know how much your loved ones inherit from you. As you might imagine, there really are predators who would love to take advantage of that very public information.

Third, you’ll want to avoid probate because it’s so expensive. We estimate that the cost to probate your estate would be roughly five percent (5%) of your estate's gross value.

Let me take a few seconds to explain what that means.  For the sake of discussion, let's say the only thing you own when you die is a house worth $500,000. The cost to probate your house would be approximately $25,000 (or 5% x $500,000). Having a mortgage -– even a really big one -– wouldn't reduce the expense by one single penny. Subject to your particular circumstances, it could cost more to probate your property than your loved ones would get after selling it.  Yuck.

(Now, please don't think that it's better to do nothing than to have a Will.  Doing nothing is actually worse because it guarantees that your loved ones will go through probate and that you'll have no control over who works with the court to make sure your estate passes to your legal heirs.)

Having a living trust avoids all of these problems. With a living trust, the process of getting your property to those you love can take less than a few months, can occur in our office, and is typically much cheaper than probate. Plus, the right trust planning allows you to make sure the inheritance you leave -- even life insurance -- is protected from immaturity, divorce, and lawsuits.  A trust can also guarantee that the inheritance is available whenever it's needed to care for a minor child.

But to get all of the protections a trust has to offer you need to work with a planner who knows how to set things up correctly. Then, after the initial setup, your planner MUST keep in touch with you over time.  Without that lifelong commitment, changes in the law, your finances and/or your family will probably make your plan obsolete.  That’s why we review our clients' plans without charge every three years. Our clients know their plans will work when they're actually needed.

You should also only hire someone you expect to be there to guide your loved ones when it's time to put your plan in motion. If your lawyer is clearly in it for the long haul, the odds of your loved ones finding themselves in probate court due to a failed estate plan will be much lower.  You'll also know that the person who drafted your plan and understands your intent will help your loved ones carry out your vision.

Having us prepare a trust for you will not complicate your life in any way. What it will do, however, is give you tremendous peace of mind. You’ll know that you’ve made the best decisions for your loved ones. Proper planning can even save up to $900,000 in the form of unnecessary estate taxes. Why should what you’ve worked hard for go to the government if it doesn’t have to?

If you or someone you know needs to make sure this critical planning is done the right way and will actually work when it's needed, we would love to talk. Our number is 916-273-9040.  You may also contact us online.