2016 Estate Tax and the Presidential Candidates

One of the frequent topics around these parts involves the estate tax. There is nothing new here: taxes on the transfers of wealth date back to ancient Egypt. Pyramids don’t come cheap. And Caesar Augustus taxed transfers on death, though he made an exception for transfers between certain close family members.

These taxes can have odd effects. Similar taxes in the late Middle Ages were one of the forces that resulted in the Church owning a large percentage of the land in Europe by the time of the Reformation. Later in England, when a handful of families controlled most of the land, these taxes had the effect of breaking up these large estates and make what we would recognize as ownership of real estate possible for many more people (and ushering in modernism). In the United States, the similar taxes were among the tools used to break up the monopolies held by people like Carnegie, Rockefeller, and Morgan.

And—oh, yes, it was also a revenue source in all of the above cases… One thing all governments throughout time and space have had in common: a thirst for other-people’s wealth.

The estate tax as we have it dates to 1916. It was substantially reshaped during the 1970s, when exemptions for gift and estate taxes were combined in a 1976 bill that resulted in the unified gift and estate tax system we have today. (Prior to 1976 there were two separate tax-schemes, one gift and one estate, which resulted in numerous loop-holes.) The result of the 1976 bill is a genuine wealth transfer tax: the federal government limits the amount of wealth that you can transfer without being taxed (called the “unified credit”), subject to certain exceptions. It does not matter whether you transfer the wealth during your lifetime (a gift) or when you die (through your estate). Furthermore, if you sell property to a family member for substantially less than fair market value the government will call the difference a gift, and count that against your credit.

So the credit amount becomes a key to proper estate planning (though not the only one). Today, the credit amount (which, again, is the amount you can pass to others without paying the tax) is $5.45M (2016). The two presidential campaigns have different views on this. The Trump campaign wants to eliminate the tax (on the federal level). The Clinton campaign wants to drop the credit to $3.5M, and raise the tax rate from 40% to 45%. Of course neither of them can accomplish this in isolation, tax bills originate in the House of Representatives. But it is an indication of their thinking. And it is an indication of something else—you recall the old saying “Two things are certain: death and taxes.” It was not that long ago that many well-intentioned advisors were telling people that they really need not worry about the estate tax—“look how high the exemption is!”. Well, today. But maybe not tomorrow. And in terms of effect it is really not very high, but that is a different post. The point is that you cannot simply disregard the estate tax. Even if repealed, it could come back with one vote. It has before, it will again. And failure to plan for that reality creates real problems: The tax is a tax on wealth, but it is paid out of income. Depending upon the nature of one’s estate and assets, this can create an insurmountable burden for those you leave behind. Which is why planning is so important…

So the point of this post is not that you should vote for Clinton so that American wealth isn’t locked up in a few families. The point is not that you should vote for Trump because estate taxes have bad effects. The point is not that you shouldn’t vote for either one of them because they are both full of corn flakes. The point is that you should plan for what will happen when you pass away, and then review the plan periodically based upon changes in your life circumstances, the life circumstances of your prospective heirs, and changes in the law. And you should not count on any relevant factor remaining static; things change and estate plans need to be fluid. The only thing that doesn’t change is that things change. So formulate your goals, and then let’s work together to help your family accomplish them.

Lump Sum Vs. Guaranteed Income: Why Make Payments to Beneficiaries?

Often, when establishing a trust, rather than giving them a lump sum, it is desirable to have the trust make payments to one person for a period of time (called a “lifetime beneficiary” or a “payment beneficiary”), setting up a guaranteed income stream, and then after that to give what is left to another person (called a “remainder beneficiary”). Two common examples: make payments to my spouse for the rest of her/his life, then split what is left equally between my kids. Or, make payments to my kids for the rest of their lives and then give the balance to my grandkids or to charity.

Why use a Unitrust?

A Unitrust is one mechanism for doing this, and a good one. But there are others. I wrote recently about the advantages of a Unitrust . Our question here is: Why would you want to do this (make payments to beneficiaries) in the first place?

With a Spouse: When the recipient of the lifetime payments is the spouse, usually the reasoning is fairly straight-forward.
• The spouse may have assets of his-or-her own. Regardless the guarantee of a payment stream, perhaps along with lifetime rights to live in a house, will assure the comfort of the spouse for the rest of her or his life.
• Additionally, the Trustee may well have discretion to make additional payments if needed. But the main corpus of the trust is protected for later beneficiaries (usually children).
i) There is no worry that it will be lost to creditors of the surviving spouse.
ii) There is no worry that if the spouse remarries that the assets, or a portion of them, will be lost.
iii) There is no worry that the assets will be depleted in the event of a major illness.
iv) And, of course, there is no worry that the surviving spouse will ‘rewrite the estate plan’ to leave the assets to others (whether willfully or due to manipulation). This concern is more acute with later-in-life marriages.

With Kids: When the recipients of the lifetime payments are the children, some of the issues are similar but many may be different. They may include:

1. Protect from spouses. By holding the corpus in trust and making payments to your child, you insure that if your child should later divorce that the corpus of the trust will not be available for distribution in the divorce. Your child will still have his or her inheritance.

2. Protect from creditors. The portion of the inheritance still held in trust is generally not available to pay creditors who obtain a judgment against your child.

3. Protect from sickness. If your child should become terribly sick, the corpus of the trust is not vulnerable to costs for care. This allows the use of public benefits to assist with care, and the Trustee can supplement the care from the trust. This will result in a much better overall quality of care than simply depleting the assets and being broke.

4. Protect from heirs themselves—behavior issues. Sadly, some people simply hit rough patches in their lives and get involved in self-destructive patterns. Whether gambling, alcohol, drugs, or something else awful, the last thing you want to do is finance the problem. Not only can the trustee see that this does not happen, but there will be something left for better days.

5. Protect from heirs themselves—spendthrift issues. It is well known that lottery winners file bankruptcy at a greater rate than the general public. Frequently people just don’t deal well with ‘found money’. Many people, upon receiving a (to them) large sum of money, proceed quickly to spend a large sum of money. Sometimes this is nothing more than willful, flagrant spending. Sometimes a more insidious irresponsibility or even naiveté. Whatever the reason(s), the money is quickly gone with little to show for it. Likely not what you worked and saved for.

6. Protect from heirs themselves—incentive to work. Sometimes we will see people respond to an inheritance by taking a little time off. Like a few years. Why work when you can live off of the savings of someone else? Related to the former point, it is important to think about what your child may do if coming into what they may receive, and the effect it will have upon them.

7. Protection of the heirs themselves—guaranteed income for life. Simply put, you can guarantee—as much as anything in this life can be guaranteed—that your child will have income for life. And it may not be enough income to live off of, but that may be a good thing too. How much difference would another $1000.00 a month make to you? How much difference would it have made back when things were tight?

8. Stretch the benefit/value of inheritance. This is more of a big-picture thing. You are looking at the overall family-picture. You are forcing the assets to be saved. They will be (presumably) invested, meaning that they will generate income. So while payments are being made, which deplete trust assets, income is being generated to replace trust assets. The payments are offset, at least to some extent, by growth. So kids can have payments for the rest of their lives, and the balance can go to grandkids, charities, or some combination.

The idea of a trust making payments to a surviving spouse, especially in a second marriage, is really a pretty good idea. The idea of a trust making payments to your children may or may not work well for children and your situation. But it is something to at least consider in determining what is to happen after your passing.

The Advantages of a Unitrust

Often, when establishing a trust, it is desirable to have the trust make payments to one person for a period of time (called a “lifetime beneficiary” or a “payment beneficiary”) and then after that to give what is left to another person (called a “remainder beneficiary”). Two common examples: make payments to my spouse for the rest of her/his life, then split what is left equally between my kids. Or, make payments to my kids for the rest of their lives and then give the balance to my grandkids. There are numerous advantages to such a plan, which are discussed elsewhere. This is about how to do it. And historically, the payment beneficiary would receive “income” from the trust or, if that was thought to not be enough, income plus a certain amount.

But when payments are being made like this, there is an inherent tension between the interests of the current payment beneficiary and the remainder beneficiaries. The payment beneficiary wants aggressive investing, to yield (at least, potentially) the maximum growth and therefore the maximum income. The remainder beneficiary doesn’t get the income, so he or she doesn’t care about growth, safe investing is what counts. This generally provides less income but helps to ensure the maximum corpus being left to them (because significant investment losses are unlikely).

Enter the Unitrust. The Unitrust varies the traditional model by stipulating that, rather than making the payment beneficiary’s payment based upon trust income, the payment beneficiary receives a payment each year that is a set percentage of the trust balance (technically the Net Asset Value (NAV)) on a given day of the year (usually January 1st) Of course, though the payment is calculated on an annual basis, it could be (and usually is) set up to be paid quarterly or monthly.

So, for example: The trust specifies payment to the surviving spouse of 5% of the NAV annually, remainder to the children. The trust has $500,000.00 on January 1st of a given year. The surviving spouse would get a payment of $25,000.00 ($2,083.00 per month) that year, and the trust might well actually grow over the course of the year (if income less expenses is greater than 5%). This means that the spouse would get a greater payment next year. Meanwhile, the trust balance cannot be lost to nursing home care, creditors, changes in estate planning, or anything else, and may actually grow depending upon the payment level chosen by the person forming the Trust and investment choices made by the Trustee.

Now the payment beneficiary and the remainder beneficiary are both benefited, at least to some degree, by trust growth and harmed by trust loss. Both have an incentive to monitor trust investments and the activity of the financial planning of the Trust. There is still a tension between the payment beneficiary and the remainder beneficiary. But the tension is now reduced to the percentage that the payment beneficiary is to receive, and this is set by the person forming the Trust.

So what should the payment be? That will depend upon your circumstances and goals, but a common starting point for the discussion is 6%. That accomplishes a number of objectives:

1. 6% of the NAV will usually, over the course of time, cause costs and payments to the payment beneficiary to match the income generated from a balanced portfolio. (Balanced portfolios are desirable methods of insuring that the trustee is properly discharging its fiduciary duty to both the income and remainder beneficiaries.) Of course, this depends a little on costs (tax prep, paying investment advisors, etc.) and depends upon market conditions (hence, ‘over the course of time’).

2. The trustee is freed from the artificial restraints of having to invest for income or growth and can follow both the “Prudent Investor Rule” and “Modern Portfolio Theory” which means that a diversified portfolio is created based on a predetermined appropriate risk tolerance, which minimizes the risk of losing value to inflation or to market declines, and lessens exposure on the part of the Trustee.

3. Both the lifetime and remainder beneficiaries are hoping for the same result, an increased portfolio value, because the larger the growth, the greater the 6% payout becomes and the greater the remainder becomes.

4. This is a really important concept in those cases where a lifetime beneficiary can be expected to live (and take payments) for several years because over that length of time an interest oriented portfolio would, in times of modest inflation, see the value of the income decline dramatically. But the Unitrust naturally keeps up with inflation with increasing annual payouts while the principal also grows.

Of course, it may be desirable to direct more of the trust balance to the payment beneficiary (at the expense of the remainder beneficiaries) or to preserve more for the remainder beneficiaries (at the expense of the payment beneficiary). An additional consideration is whether or not the Trustee has discretion to make additional payments to the payment beneficiary if the payments are not adequate at some point (often done if the payment beneficiary is a surviving spouse or disabled). So, yet again, the key to estate planning is the planning, but the Unitrust is a very useful (and greatly under-utilized) tool and this a good starting point for the discussion.

Why Clark v Rameker Matters To Your Children: Protecting Retirement Funds for your Heirs

Retirement plan assets have become a major factor in the USA, amounting to approximately $23 trillion as of the end of 2013. Many individuals and estate plans use IRA accounts and other retirement funds as an integral part of succession planning. And such a big chunk of funds is always going to be a target.

On June 12, 2014 the U.S. Supreme Court unanimously ruled in Clark v. Rameker that an inherited IRA is not exempt from claims of creditors under the Bankruptcy Code provisions that generally exempt “retirement funds” from claims of creditors. There are numerous creditor-protections that protect retirement funds from creditors. Now, not all retirement funds, not all creditors, not in every circumstance. If you have creditors knocking at your door, you need particular advice for your situation—and you should not waste time getting it. But in general, retirement funds enjoy numerous protections.

The question has been: do inherited retirement accounts enjoy the same protections? Many people have wrongly assumed this to be the case, with the result that they will tell you to go ahead and name your kids as beneficiaries on your retirement accounts…this is the best thing to do…it is perfectly safe. Before the June decision in Clark, whether or not they were right depended in part upon where you were standing in the United States when you asked the question.

But now the United States Supreme Court has spoken, and it turns out these people were wrong all-along. On June 12, 2014 the US Supreme Court shook the financial world with Clark v Rameker.  In Clark the court held 9-0 that inherited retirement accounts are NOT exempt from the claims of the bankruptcy trustee (and other creditors). You can read it here.

Here is the short-version of the story: During her life Ruth Heffron established an IRA and named her daughter Heidi Clark as the beneficiary upon her death. People do this every day. When Ms. Heffron died in 2001, Heidi inherited Mom’s IRA under the beneficiary designation and rolled it into an IRA in Heidi’s name. Happens every day.

Fast-forward to 2010, when Heidi and her husband filed chapter 7 bankruptcy and sought to exempt the roughly $300,000 in the IRA, which Heidi had inherited from her mother’s IRA, under a provision of the bankruptcy code (specifically, 11 USC §522(b)(3)(C)) that affords creditor protection for many (but not all) retirement accounts from most (but, again, not all) creditors. On behalf of the creditors, the Trustee (William Rameker) challenged the exemption.

In the end the bankruptcy court refused to allow the exemption, and the Clarks appealed to District Court…and on it went to the US Supreme Court. In plain, if perhaps slightly oversimplified English, the court held that inherited IRAs are simply not the same as money an individual has set aside for the day that individual stops working, and the owner of inherited IRA can withdraw the money at any time without penalty (though, of course, taxes are due). Apparently, as the court sees it, the creditor-protection exists to prevent late-in-life poverty for that individual, the person inheriting the IRA is not relying on the money the same way.

So what do we do?

What is clear: The court has made it clear that IRAs that name children as beneficiary enjoy almost no protection from the child’s creditors under federal law. It is fairly clear that this result would extend to any sort of inherited retirement account. Now there is spotty protection under state law in a few states, including North Carolina, if the heir happens to live in one of those states. But it is spotty, could easily change in light of Clark, and anyway people move around a lot. So relying on state law protections is a real gamble.

What is not clear: Are retirement accounts inherited by a surviving spouse protected from creditors? The Clark case does not address that. Logic applied to the reasoning in Clark would say spouses do NOT enjoy protection, either. But the law is not always logical and it may well not work out that way. This is a big deal, but at present the law is very unclear. We will deal with that thorny issue in a later post.

For now, what we can say is that you probably should NOT name your children (or anyone other than a spouse) as beneficiary (or contingent beneficiary) of your retirement account(s) directly unless it is a VERY small sum of money or you are VERY unlikely to die (I would like to get in on that one), or you just don’t care what happens.

The ideal solution would be to name a stand-alone IRA Beneficiary Trust as beneficiary of your retirement accounts. I discuss such a trust in our Estate Planning FAQ section and have written about them and their benefits elsewhere. If properly done, this will protect retirement funds left to any beneficiaries (spouse, children, cats) from their creditors.

It also presents numerous other advantages. There is NO one-size-fits-all package for estate planning. As we say over and over, the key to estate planning is planning. But this is a great option for many who want to insure that hard-saved retirement funds improve the life of their family and not the bottom-line of a creditor or of some other predator.

Another option is to name your properly-drafted revocable living trust (RLT) as beneficiary (using conduit provisions). This does not have nearly the level of protection as the stand-alone IRA trust. But it is simpler and it does help quite a bit, and it may be appropriate for you. It is certainly far preferable to naming beneficiaries directly in most (not quite all) circumstances.

The worst thing you can do is nothing. You have worked too hard for your money, and your family is too important to ignore the issue. This is why estate planning is critical. Call us, we can answer your questions about protecting retirement funds and other estate planning issues, and then craft and implement an estate plan that meets your needs and achieves your goals. Call us today to start the discussion.

I Don’t Think I Can Call This “The Beat Goes On” Because of the Copyright Thing…

The Beat Goes On, Estate Planning Lessons from the life and death of Sonny BonoSo I am sitting at my desk working when Sonny and Cher’s The Beat Goes On comes on Pandora. Cool… And as music has a way of doing, I am instantly launched back in time to the early 70’s, for me a simpler time. If I remember correctly, The Sonny and Cher Comedy Hour was an attempt by CBS to gain back some of the young audience it had lost when the very popular “The Smothers Brothers” was cancelled by network execs nervous about Tom and Dick’s political views. Not simple for CBS. But wonderfully simple for a young Rick who enjoyed sitting on the family room floor in front of a “portable” 19-inch color TV (that weighed about 200 pounds) being carried away by the music, the skits, and listening to Cher bash Sonny (even if I didn’t “get” it all). Read more

Why Exemption Trusts Still Matter

Why Exemption Trusts Still MatterFor a long time revocable living trusts were touted as a way that married couples could pass more property free of estate tax. Some of this was unscrupulous, hucksters in the smoke-filled back room of a bar hocking estate plans out of a box, and all of that. But some of it was legitimate, because revocable living trusts do allow an easy way for married couple to take full advantage of what we call “portability”.  Read more

Beneficiary Designations and Trusts: One Size Does Not Fit All

Beneficiary Designations and Trusts: One Size Does Not Fit AllTransferring a retirement account to beneficiaries seems simple enough. Certainly your fund manager or financial planner will tell you it is—all you have to do is fill out the beneficiary designation form they provide to you. But is it really that simple? Well, in a sense yes. If you complete the beneficiary designation form by naming your beneficiaries directly (e.g., equally to my son Bob and daughter Jane), the names on the form, along with the terms of the underlying contract (and if you are a glutton for self-abuse, try reading one of these!) controls. And this is simple and safe for the retirement plan manager, because it means they do the same thing all the time. But what about you?

SO WHAT’S IN IT FOR THEM? Two things. Simplicity and the Avoidance of Risk. By getting you to name beneficiaries on their form, pursuant to the terms of their contract, they control the outcome. And they limit the work they have to do and, more importantly to them, their exposure to risk. They know their contract and their rules. And they are all terribly litigation-averse (meaning that they really, really, really don’t want to do anything that might land them in court.)


But what happens if:

  • Your beneficiary is a under 18? State law says they cannot have the retirement benefits, and the courts and the fund contract will control what happens next, but will probably be at best both expensive and a pain.
  • Your beneficiary dies before you do? The plan contract will determine this, and it may not be what you would decide.
  • Your beneficiary is about to be divorced, lives in a community property state, has just filed bankruptcy, has judgment creditors or other problems? The answer, of course, depends on a lot of factors, but long-story-short the beneficiary could well lose some or all of the money.

But all of these scenarios present problems for YOU and YOUR HEIRS, not the retirement plan manager. All they have to do is abide by the terms of their contract and they are golden.

SO WHAT’S IN IT FOR YOU? Well, if you would like to control what happens if an heir dies before you, if you would like to limit the ability of your heirs’ creditors to get to your heirs’ inheritance, and if you would like to avoid complications if you have an heir under 18, you can name a TRUST as beneficiary of your retirement plans.

Now if you do this, it is CRITICAL that you have a well-drafted trust and have thought through all of the implications of doing this along with the possible outcomes. Some sources will tell you that this exposes your retirement benefits to YOUR creditor claims and to adverse tax implications. Both are true IF your trust is NOT properly planned, drafted, and funded. So this is not the place to save a few bucks—if you are going the trust route it is worth it to do it right. But if properly set up, a trust can work VERY WELL as beneficiary of retirement accounts and solve many problems.

Some financial planners and fund managers will discourage this. The reasons include those we mentioned above. And some have seen the disaster of poorly drafted trusts and since they are not really qualified to tell the difference between good and bad the straight beneficiary designation is just safer for them. Sometimes they just have out-of-date information. And most of them simply don’t understand trusts. But that is okay, I don’t understand some financial products. We each have our field.

So should your trust automatically be the beneficiary of your retirement plan? No. But if you have a trust it may be an option you should consider. Trusts are a common estate-planning tool, but are not appropriate for everyone. And even if you have one, and it is properly set up to handle retirement benefits (not all are), it still may not be the thing to do. Or you may want a separate trust just for the retirement benefits.

The point is that it should not be an automatic thing to name the trust as beneficiary, but NEITHER should naming beneficiaries directly be automatic. Everybody’s situation is unique, and the key term in Estate Planning is PLANNING. Sometimes life is complicated, and this is one of those times. Any one-size-fits-all approach is deficient by definition. Don’t fall for it.

Image credit: Andrew E. Larsen

Five Key Issues in an Estate Planning Document



The NC courts have again spoken in the ongoing war between LegalZoom and the NC Bar. LegalZoom assists people in creating their own legal documents through an interactive website. The NC State Bar claims they are practicing law without a license. The responses to all of this vary from ‘LegalZoom is a scam that should be shut down’ to ‘the Bar is just protecting its turf so that lawyers can keep screwing everybody’ to ‘caveat emptor’, and a few things more thoughtful.

I have considered weighing-in on this. But before (maybe) someday so doing, I think that there is some background information that is necessary. And (in my opinion) this information is helpful even if you don’t care about the war between LegalZoom and NC (or Alabama, or Arkansas, …).

Of course, DIY legal documents are nothing new. Libraries (remember them?) used to have books (ahh…more memories) full of forms that could be filled in/modified for use, especially in business transactions. I need a will (or a trust, or an LLC, or a contract, etc). (We will save the business application for another day and focus on estate planning documents.)

You have a will or trust done by an attorney, I do one online. We both have wills (or trusts). All documents are the same, right? Well…no.

There are really five keys (or issues) in the assessment of an estate planning document. This is true of both wills and trust agreements. And it is true whether the document is DIY or attorney-drafted. These are:

1.  Is the document valid?

In other words, is the will a valid will under state law? Does it meet the technical requirements to be admitted into probate? Does the purported trust agreement actually create a trust under state law? Usually, this is not a problem. Because while the technical requirements for a valid will are quite particular and rather inflexible, they are not tough. (Note: the requirements for a valid will vary somewhat from state to state.)

Trust agreements, which are basically contracts, are even easier. Someone without legal background sitting at a keyboard without any aids might not be able to create a valid will or trust. Doing a “cut and paste” job with stuff found online may not work out much better. But with the use of form books, software, or online form generators most people will usually wind up with a “valid” document. Hence, those online sources will often “guarantee” you a “valid” document. But “valid” is only the start. Read on—because sometimes we will see people who would be better off if the will was not valid.


2.  Will your document really do what you want it to do?

So the will is admitted into probate. What next? Will your property go to the right people? Depends in large part upon the document and the planning behind it. And it usually won’t matter what you intended, only what the document actually does. So you have to be able to articulate what you want. That can be hard enough, but that is the easy part. You also have to anticipate all of the ways things could change between now and when you pass away, and deal with all of those possibilities. Then you have to anticipate all of the things that could go wrong and deal with them.

Suppose you are on your second marriage. Your spouse has a child who is 6. You have two adult children from your first marriage. You have about $100,000.00. You like your step-child and want to leave him something. Your current husband makes plenty of money and will be fine (financially). Mostly, you want to leave your money to your two kids. So you draft an online will. Simple enough. You will give $5,000.00 to your step-son. (You can’t give money to someone under 18 in NC, so you must deal with that or the court will deal with it for you…for a price.)   You decide to divide the rest between your two kids. The online generator does that. Simple enough (except for that money-to-a-minor thing).

Until you die. You leave $30,000.00 in debt that must be paid. You now have $70k. Your step-son not only takes his $5k, but files a statutory dependent’s allocation petition for another $5k (so your will really left him $10k—bet the online form vendor didn’t tell you about that!), and your current husband files spousal allocation for $30k—OR WORSE exercises his statutory right to dissent from your will and take half of EVERYTHING (including life insurance). Of the $100k your two kids, at best, are getting about $5k each. Probably not what you intended—but what you did.

There are at least four big issues involved here (and a lot of little ones). The first is that there may be various statutory considerations (like dependent’s and spousal allocations) that just aren’t anticipated by DIY sources. And they complicate things. Second—wills (and to a slightly lesser extent trusts) are realms of “magic words”. And the form may use the “right” words, but if you don’t recognize them and/or their absence—and know what the courts have said about them—then when you read the document you won’t really understand what it says. Which makes it hard to assess. Third, and related to the second, courts have a funny—or particular—way for reading these documents. That is part of the deal. If you don’t understand it you are probably headed for trouble. And finally, life is complicated and can change rapidly. Good estate plans allow for that. Freebies usually don’t.


3.  Is what you want it to do well-considered?

I think that this is a HUGE point. Even if the document is valid and will do what you want, is what you want a good idea? Have you considered the full impact of what you are doing? The potential results and complications? Other, possibly better, options? The key component of estate planning is the PLANNING. The documents are just tools to make it happen—the PLAN is the KEY.


4.  How many potential problems are created, and how will complications be handled?

Does the document itself create problems through vague, conflicting, or missing terms? Does it fail to address key issues that may arise (or that are sure to arise)? How solid is the document if there is a challenge by an heir or prospective heir? How much will the resolution cost? While there are certainly problems that arise in trusts and estates with attorney-drafted documents, DIY documents are particularly prone to vague and/or conflicting provisions, even among key terms. (Not all attorney-drafted documents are created equal either, but that is a different post.)


5.  How well is the rest of your life integrated with the document?

This gets back to the planning issue. Do you have Qualified accounts with beneficiary designations? Life insurance? Bank accounts with Pay-on-Death provisions or a joint owner? All of this needs to be integrated as part of your estate plan, and you need to understand how this all intersects with your will or trust.

And if you own your own business…my the potential for problems if this is not carefully thought through and arranged.


So what is the take-away? Are some lawyers crooks? Sure. Do some lawyers draft poor-quality documents and fail to spot issues? Clearly. Do even good and honest lawyers make mistakes? Yes. Are online form sources always a mistake? Probably not. If you need a bill of sale for a car, or are renting a house to your brother for a year, an online form might be a good choice. Simple situations and even if things go bad, you have limited risk.

Not so with estate plans. Even if all you need is a ‘simple will’, that determination is itself a complex one. And often when someone finds out it is screwed up it is too late to fix it. So the risk is great.


If you own a house you likely have fire insurance. Not because the house is likely to burn down, it isn’t. But if it does, the risk (expense) is great. This is the problem with DIY estate planning. Or, for that matter, with the most popular form of estate planning which is doing nothing. Because the death rate is one per person. You will die. When you do, there may or may not be complications. There may or may not be problems with your estate plan. But if there are either, it is bad news.



I Only Need a Simple Will…

Clients contact us all the time convinced they “only need a simple will”.  Now, in lawyer-speak, a “simple will” is a will which contains no testamentary trusts.  But this is not necessarily what is being asked for.  Read more

Movies and Estate Planning Law: Brewster’s Millions

Based upon George Barr McCutcheon’s 1902 novel of the same name, Brewster’s Millions is the story of Minor League Baseball pitcher Monty Brewster (Richard Pryor).  Though unintended, the story is a useful lesson in estate planning. Well, we’re going to use it for that purpose anyway and how North Carolina laws apply to estate planning, wills and such. So here’s the story, Monty and his friend, Catcher Spike Nolan (John Candy) are happy playing for the minor league Hackensack Bulls (who happen to have a railroad running through the outfield!).  Read more