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"Trusting a Trust Attorney"
Hmmmmm What should I Do?:
You should ask many questions before you hire an estate planning lawyer, as well as during the estate planning process. The questions in this article should help you find a qualified lawyer and avoid complications and surprises down the road.
Before you hire your lawyer, ask yourself the following questions:
1. Do you trust the lawyer?
2. Are you comfortable with the lawyer?
3. Is the law firm well organized?
4. Do you expect this law firm to be around when your trust goes into effect or your estate is probated?
Follow your instincts. If you are not comfortable with a lawyer you consult, hire somebody else. Many other estate planning lawyers are available to help you.
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__How Long Have You and Your Firm Offered Estate Planning Services?
Your lawyer’s experience with similar cases can result in significant savings of time and money. Ask the lawyer the following questions about his experience planning estates:
What Is Included in My Estate Plan?
When you meet your lawyer, discuss your estate planning needs. You should discuss which documents your lawyer will prepare.
Your lawyer may offer a set of estate planning documents or may create a custom package for each new client. In addition to your will and trust, your complete estate plan includes a durable power of attorney, healthcare proxy and living will. Thus, when retained to draft a living trust, many law firms will provide a package that includes all five documents. Other firms charge additional fees if you desire any additional documents.
If your lawyer creates a living trust for you, will your lawyer also draft a pour-over will, a will that directs funds or other assets into your trust? What is the additional cost? Will the lawyer help you transfer your assets into your new trust? If so, will there be an additional charge?
After the estate planning process is complete, will your lawyer notify you if changes in the law are likely to affect your estate? If you return for a review of your estate plan, what will the lawyer charge?
How Much Will My Estate Plan Cost?
Some law firms charge an hourly fee for all estate planning work. Other firms will offer specific documents, or a set of estate planning documents, for a fixed fee, with additional services offered at an hourly rate.
Avoid sticker shock. When you meet with your lawyer, find out what you’re getting for your money and whether your lawyer’s fees will fit within your budget. The amounts firms charge for estate planning services can vary significantly, even within a community, so you may want to get prices from a few firms.
Many law firms offer discounts for revising estate plans that they prepared. Ask about the cost of revisions and whether the firm offers any discounts.
Do You Sell Insurance?
Some estate planning lawyers sell insurance policies and annuities or direct their clients to an affiliate that sells insurance. Although you should remain open to using insurance as part of your estate plan, don’t will not purchase any insurance from your lawyer, anybody who will be paying a referral fee to your lawyer, or anybody who will be sharing commissions with your lawyer.
Insurance policies and annuities often pay high sales commissions. Lawyers who don’t share in the profit have an incentive to direct you to the best polices, not those which are most lucrative to them.
Bad advice and excessive commissions
In a horror story of a case, a young woman was left in a coma as the result of medical malpractice. Her parents turned to a local lawyer for help. After the lawyer negotiated a substantial settlement, he convinced the parents that the settlement money should be used to purchase annuities to provide their daughter with an income to cover the cost of her medical care and personal needs for life.
Although the lawyer knew that the young woman’s life expectancy was only two or three years, he purchased annuities that would not survive her, pocketing an extraordinary commission of approximately 25 percent. Between the commission and his legal fees, he took well over half of the total settlement. Two years later when the woman died, her parents discovered that the settlement money was gone — and so was the lawyer.
This story is exceptional, but it highlights why I suggest purchasing your insurance from somebody other than your lawyer.
Who Should I Choose as My Trustee or Personal Representative?
Your lawyer should understand the necessary qualifications for your trustee or personal representative and help you make appropriate choices.
Depending upon the size and complexity of your estate, your lawyer may recommend an institutional trustee, such as a bank or trust company, as the best choice for your estate. Be aware of a possible conflict of interest and ask whether the recommended institutional trustee pays referral fees to your lawyer.
While many lawyers consider it a conflict of interest, some law firms offer trustee and personal representative services for estates they’ve planned. Be wary of any self-interested recommendations. Due to possible future conflicts of interest, I suggest selecting someone not affiliated with your estate planning firm.
If you’re tempted to designate your lawyer as your trustee or personal representative, make sure that you have a good understanding of the conflicts of interest that may later arise and how they’ll be resolved. A conflict of interest may arise from:
Should I Be Worried about Taxes?
Your lawyer should explain the estate tax and how it’s likely to affect your estate. If you expect your estate to be valued at more than $1 million, discuss estate tax strategies with your lawyer. I don’t expect the estate tax repeal to be made permanent, and it makes sense to plan for the possibility that the future estate tax exemption will be in the range of $1 to $2 million.
Discuss with your lawyer the gifts you have made to your heirs during your lifetime because they can affect your estate’s tax liability. (And yes, if you have done so, that includes adding your child to the title of your home.)
Estate taxes are not the end of the story. Your estate may not be subject to estate taxes, but you can expect that it will pay other taxes. Your estate planning lawyer should advise you about other taxes relevant to your estate, including capital gains tax, property tax, and income tax. Your lawyer should inform you whether your trust has to file annual tax returns.
If you have a very large estate, in the tens of millions of dollars, your lawyer may suggest some creative strategies for estate tax avoidance. Ask your lawyer whether the IRS has challenged any of the recommended strategies.
What about My Children and Grandchildren?
If you have dependent children, let your lawyer know their ages and needs. Your lawyer can help you plan for your children’s personal, financial and educational needs in the event of your death.
A good lawyer can help you create an estate plan that is fair to your children. If you anticipate disputes among your children or don’t plan to give your children equal inheritances, let your lawyer know at the start of the estate planning process. Your lawyer can help you prepare for conflict and reduce the possibility of an estate contest.
If your child has financial difficulties, ask your lawyer to suggest how to protect an inheritance from your child’s creditors. If your child has special needs, discuss how to leave an inheritance that won’t be taken by the state to recoup the cost of government benefits.
If you’re leaving money to your grandchildren, ask your lawyer about the best ways to make your bequests and about any potential tax consequences. Carelessness can result in your grandchildren having to pay avoidable estate tax or generation skipping tax, a sizeable tax that may become due in addition to the estate tax.
Generation skipping taxes do not apply if the intervening relative is deceased, so if your son dies before you do your bequest to his children (your grandchildren) is not subject to this tax.
What Should I Do with My Family Business?
Do you own your own business? Your business may be the most valuable asset in your estate, and its value will probably continue to grow. Your business succession plan may be the most important part of your estate plan.
It is often said that only 30 percent of family businesses survive into a second generation of ownership. I have some doubt of the accuracy of that figure, but it is true that many businesses don’t survive their original owner. Business succession planning can help keep your business from becoming a statistic.
In addition to transferring ownership and assets, a good succession plan
If you have business partners, involve them in creating a comprehensive business succession plan. The plan may provide a method for determining the value of your shares and how surviving partners can purchase your shares from your estate.
What Else Should I Be Doing Now?
Creating an effective estate plan may involve more than the drafting of a set of documents. Ask your lawyer about what else you should do to organize your estate or minimize estate taxes. For example:
When Will My Estate Plan Be Complete?
While most estate planning lawyers are quite diligent, you’ll have more peace of mind when you have your completed, executed estate plan in hand. Unless your case is unusually complicated, your lawyer should be able to give you a good estimate of when your estate planning documents will be ready for your signature.
Are you getting married? Expecting a child? Planning a trip to scale Mount Everest? If you want to have your estate plan completed in time for a specific date or event, tell your lawyer.
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