It is the people, not the process that is the problem.
A True Story
As a student in law school, my professor for Wills and Trusts used to say, “Money makes people funny”. As long as someone dies with very little money, in my experience, few issues arise and the modest personal possessions of the deceased are distributed by the family without much discord. My mother-in-law passed away with very few possessions. Towards the end, she was in intensive care and every time I had occasion to visit her, she was surrounded by grandchildren or children. I don’t mean one or two. She always had a crowd. On a number of occasions, the staff at the hospital had to escort family members out of the room as they couldn’t get access to her because of the number of people in the room.
If you want a true measure of your wealth, consider who would be surrounding you under similar circumstances? You can’t take what you own with you. So the greatest true wealth you can accumulate is the love and affection of those who care about you, in spite of your wealth. We all hear stories about people who die with significant assets, like Brooke Astor which result in years of litigation over the decedent’s assets.
When counseling clients about estate planning, many of them are convinced they need a Trust so that they can avoid probate. The truth is that many of them set the stage for battles that prolong the probate process after their death by disavowing a child in perpetuity with gracious language like, “for reasons known to them”, or “for lack of love and affection”. In the end, the bulk of the estate ends up passing to the attorneys who represent the parties who decide to fight to the bitter end. They end up never speaking to one another again in many instances.
I tell clients, it isn’t the process that is the reason probate has such a bad reputation, most of the time you can trace the costs and delays back to the people involved or a troubled asset. The same people are going to be involved with a Will or Trust and the asset is likely to have the same issues with either process. With the estate tax obligations exceeding $5 million in assets and double that for a married couple, trusts have less utility for most Americans as the majority of estates are far less than that amount. There are Payable On Death savings and checking account designations, Transfer On Death assignments for investments, and many states authorize deeds that will default to a taker without the need for probate. Here in Michigan, the auto can pass by filing out a simple affidavit at the Secretary of State’s office. But, many attorneys continue to sell living trusts as a vehicle to help a client “avoid probate”. Ask the client what is it about probate that they want to avoid? They will often say costs, extensive delays in distributions or some will even believe that the state will get their property because of probate.
It is an uphill battle convincing a client with a modest estate that a trust is not in their best interest. Trusts need ongoing maintenance and can often disqualify an individual from government benefits, like Medicaid. At the time of death, the successor trustees will consult with an attorney (and not for free) to determine how to manage the estate.
Many attorneys will argue that the trust means that the costs of administration are paid up front rather than on the back end. However, I have seen many cases where a trust was put in place to protect a spend-thrift from himself. In the end, most trusts have an escape clause allowing early discretionary distributions in the event of an emergency. The very same people you are attempting to protect from themselves end up coming into court claiming an emergency has occurred and they should get an early distribution for education or health care needs. The trustee ends up hiring an attorney to defend the trustee’s actions in withholding payments. In the process, that attorney charges fees to conduct that defense and the corpus of the trust shrinks as each year passes and the maintenance costs begin to make it impractical to continue the trust.
In many states, placing the client’s primary residence into a Trust will disqualify them from Medicaid and for a single client with a modest estate and advanced in years, that tactic might constitute malpractice.
If you are in private practice and you rely on revenue for estate planning, I believe you can do more good and save the client, who has a modest estate, a lot more money by using techniques to by-pass probate and educate the client on the cost savings and efficiency in doing so. By doing a comparison of the cost of a Trust vs a Will in many instances, you are likely to find more clients finding their way to your door than if you continue to counsel them regarding archaic practice principles or doing Trusts simply out of habit. You can make more money guiding them through good counseling concerning their pets, health care directives and ethical Wills designed to encourage family harmony with words of love an affection for those left behind and encouraging language designed to allow the executor or personal representative to do their job without interference or delay.
Read some of my earlier posts including, Four Steps to Avoid the “Land-Mines” At Death which I posted last month for some of those techniques.