Estate Planning Practice Blog

Standard of Care: Quick Analysis for Estate Planning Attorneys

Estate planning attorneys must always be cognizant of issues surrounding capacity and incapacity of their cilents when preparing and executing estate plans at their client's direction. Here are some recent thoughts about standard of care required by an estate planning attorney for review and consideration. It's also a good reminder to get your estate planning accomplished sooner than later. You never know what the future may hold for your own capacity. You may suffer from an illness, be in an accident or otherwise have dimished capacity that would prohibit you from executing your estate plan in accordance to your wishes.

To begin, an estate planning attorney is required to perform legal services with the same degree of skill and diligence that other members of the profession display when determining whether his or her client has capacity to execute estate planning documents.  Unfortunately, there is no bright line test to determine the mental capacity of a client.  

In California, the Probate Code establishes a rebuttable presumption that all persons have the capacity to make decisions and to be responsible for their acts and decisions. (See Cal. Prob. Code §810).   Thus, a person who has a mental or physical disorder may nevertheless be capable of executing a will or trust.  An attorney must look to Cal. Probate Code § 811 to determine whether a client has a mental deficit, which would result in a lack of capacity to execute a will, trust or other estate planning document.

Under the ABA Model Rules 1.14, (ABA is the American Bar Association), an attorney owes the client a duty to be reasonably alert to indications that the client is incompetent or is subject to undue influence, and where indicated, to make reasonable inquiry and reasonable determination in that regard.  If the attorney reasonably believes that the client cannot adequately act in his or her own interest, the lawyer may seek the appointment of a guardian or take other protective action.  The evaluation of the client's best interest is simply a matter of professional judgment on the lawyer's part.    California, however, does not have a statute or rule that corresponds to MR 1.14. Instead, California ethics opinions state that a lawyer must not petition the court to have a conservator appointed because it would violate the lawyer's duties of confidentiality and loyalty, thus violating the duty in Business and Professional Code §6068(e) to maintain the confidences and secrets of the client. 

California law does acknowledge that the degree to which a lawyer may use his or her judgment in making a decision on behalf of the client appears to depend on the degree of incapacity of the client, and on the specific legal context in which a decision is to be made.  Specifically, counsel has a duty to ensure that a client is competent to understand the nature of the proceedings and at times will have to assist in the client's defense despite the defense being at odds with the client's asserted interest.

For counsel to determine the client's testamentary capacity, they should evaluate the client at the exact time of the execution of the will. However, some authorities take the view that counsel should determine testamentary capacity when the instructions for the will were given.  If the client has testamentary capacity at the time of the instructions for the will, then the measure of capacity required at the time of execution may be altered.  An important way to determine the client's testamentary capacity is to know the condition of his or her mind a reasonable length of time before and after the execution of the will, because a client's mental state typically degrades slowly with the passing of time.

The capacity is lacking if the testator is not able to understand the nature of the testamentary act, understand and recollect the nature and situation of the individual's property, or remember and understand the individual's relations to living descendants, spouse and parents, and those whose interests are affected by the will. (See Cal. Prob. Code § 6100.5).  In addition, if the testator suffers from a mental disorder with symptoms, including delusions or hallucinations that result in the testator's devising property in a way that he or she would not have done, there is no testamentary capacity. (See Cal. Prob. Code § 6100.5).

Finally, the attorney should also be aware of third parties.  It is not unusual for a third party, usually a sibling or an adult child of the client, to bring the client in and also to have spoken to the attorney prior to the attorney meeting the client.  In this situation, the task for the attorney is to judge the mental capacity of the client independent of the opinions of others.  The attorney should also discuss the intentions of the client alone without the presence of the third party.  Even when the client insists on the presence of another individual during meetings, the attorney should insist on frequent, periodic meeting time alone with the client to verify that what is transpiring is the dependent intention of the client, and not the substituted desires of others. The client must be able to provide independent thought as to testamentary intentions. 

Of course, this is only a synopsis of the standard of care to be exercised by estate planning attorneys and only applies to California and should be supplemented with case law research and analysis. At no time, does this blog post on this issue be construted as legal advice or applicable to your situation, whatever it may be. It is being posted to provide an exploration of the standard of care for estate planning attorneys. 

Alone? How about some EP documents as preventative medicine?

I made a court appearance regarding a conservatorship matter earlier this week. We represent a conservator who is a friend of the conservatee. What happened to the conservatee -- she's a nice lady in her late 60s and lives alone. Her family lives in Europe. Her friends and acquaintances are modest here in California. So modest that many might not know something happened to her. She retired so she doesn't go to work everyday. A few months ago she suffered a stroke. The stroke didn't incapacitated her permanently. She will likely make a strong recovery and be able to enjoy her life again. Certainly not the same as before, but still have an enjoyable life nonetheless.

She lived in an apartment. She drove a nice car. So when she had the stroke, she called the ambulance and was immediately transported to the hospital where she stayed for at least a month. She was later moved to a rehab facility. Currently she resides in a less restrictive facility, but still has not returned to her apartment.

When she was admitted to the hospital, she could not communicate. She could not tell anyone who to call. So the authorities stepped in after some time to locate a family member or friend. In the meantime, her apartment rent went unpaid. Her car payment went unpaid. Her other bills piled up. After three months of unpaid rent, eviction proceedings were initated against her. Remember no one knew what happened to her or that she was in the hospital. Her family lives in Europe.

Finally a local contact was found and now steps are being taken to ensure her affairs are properly managed, but she had already lost her apartment and her belongings wound up in storage for only a short time before they would be auctioned off. The local contact was able to obtain court authority to manage her affairs temporarily until her family could be finally located and things done accordingly.

I could go on and on, but the morale of this lady's plight is simple -- even when you think you have nothing to leave to anyone or even anyone to leave your things to -- you still need to worry about what happens to you. Having a will, power of attorney and advance health care directive would have made all the difference in the world. Put these executed documents in a normal place -- your office or a post it on your bulletin board near your phone -- say all of my estate planning documents can be found here. Write down a list of contacts for an emergency and get an attorney on board. If something happens and the authorities wind up searching your home for who to contact, they will discover an attorney's card, the list by the phone, the binder on your bookshelf that says Estate Planning documents. Having these things in place for this lady could have greatly affected what happened to her affairs while she was incapacitated.

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Estate Planning, Probate and Trusts involve complex areas of law. Individual circumstances must be considered before any advice can be given.  The general information above is not to be construed as legal advice, which can only be given after consideration of the unique facts of each matter. Please seek the advice or counsel of your attorney, financial advisor or CPA as it may be appropriate.

Kids and Estate Plans. No Excuses.

I am constantly amazed at how many parents do not have an estate plan in place to protect their minor children.

It's one thing not to be overly concerned when your children are older, but if you have minor children in your home, life insurance policies, real estate and the usual extended family with grandparents, aunts, uncles -- there is almost nothing more important that consulting with an estate planning attorney to find out what you need to do to protect your minor children in case you and your spouse pass away.

If something happens to both Mom and Dad, there are guardianship issues, money issues and other issues that immediately come up. You want to make it easy for your family and friends by providing clear instructions on who should be the guardian, the executor, the trustee and the like. You don't want to make it any harder should your children be facing the loss of both Mom and Dad unexpectedly.

I could go on and on, but consulting with an attorney to draft up wills, trusts, and other related documents is a definite must do.

Immortal Fame: Publicity Rights, Taxation, and the Power of Testation

Joshua C. Tate, Assistant Professor, Southern Methodist University, Dedman School of Law, has written numerous scholarly articles involving the area of estate planning and related matters. We are fortunate to receive notification when he has released new articles. For more information about Joshua's articles, click on his name under the link below. It will run a real time search and pull up his works. There are some other interesting articles as well -- consider Conditional Love: Incentive Trusts and the Inflexibility Problem or Caregiving and the Case for Testamentary Freedom.

Joshua's latest article delves into the interesting intersection of celebrity and publicity rights in postmortem use.

The Abstract:

"Publicity rights, or the rights to the use of one's image and likeness, are a relatively recent form of property. Several states now recognize rights of publicity as survivable, meaning that the heirs of deceased celebrities can inherit those rights. Because U.S. law has traditionally granted each individual the power of testation, a celebrity can also freely devise the rights to persons of her choosing. Nevertheless, some scholars have recently argued that publicity rights ought to pass automatically to specified statutory heirs regardless of the celebrity's wishes. Destroying the power of testation, these scholars allege, will insulate postmortem publicity rights from the federal estate tax and protect familial interests.

This Article considers whether state law should, as a general principle, override testamentary intent with regard to postmortem publicity rights. Evaluating the problem from both a property perspective and a tax perspective, the Article concludes that no such interference with testamentary freedom is warranted. There is admittedly some historical precedent for protecting the interests of surviving family members with regard to rights intrinsically connected to one's person, such as the right to dispose of one's body and the right to profit from one's artistic creations. The protective measures taken in these contexts, however, either lack a coherent justification or developed for reasons that do not apply to modern rights of publicity. Moreover, exempting publicity rights from the estate tax based solely on the abolition of testamentary freedom would be contrary to basic principles of tax policy. While Congress could amend the Internal Revenue Code to alleviate certain difficulties of valuation, it may be preferable to maintain a tax incentive for celebrities to donate their publicity rights to charity."

Great Analogy About Eating Delicacies and Your Estate Plan.

A Friday funny, perhaps? This topic was circulating on one of my email groups for solo and small firm attorneys. It's a great point being made about going to someone who has the proper credentials (i.e., an attorney) and has experience (in doing estate plans).

Thanks to Mitchell Matorin, Massachusetts litigator extraordinaire, and E.J. Hong, an estate planning attorney in Palo Alto, California, I learned that blowfish testicles have poisoned 7 in Japan. 

Mitch says that "Life is full of unpleasant surprises.  Do you have a plan to deal with them?"

The article linked to above quotes that an unlicensed chef prepared the delicacy usually eaten by thrill-seeking gourmets.  The same analogy can be made for all sorts of matters. And since your estate plan may be the matter that matters the most, seek out the advice of an estate planning attorney before you proceed.

E.J. said it simply, "When it comes to estate planning, you shouldn't go with an unlicensed advisor to help you plan for the future. The thrill is not worth it and it may actually be poisonous to your plan to protect you and your loved ones."

As always, should you have questions about your own estate plan, seek the advice of an attorney near you.

Back to Basics.

I was talking to a well respected CPA who handles large estates (meaning large enough to have to file a federal estate tax return, which as of this year 2009 means an estate with a value of more than $3.5 million dollars) as a majority part of her accounting practice. While she was married, she did not have kids. So I asked her if she had an estate planning attorney. I was aghast to find out that this person felt that estate planning documents weren't needed as their estate wasn't "complex." I was also shocked to find out that this person had little knowledge of the basic benefits offered by having an estate plan in place.

For most individuals, estate planning is very important. In California, having a proper estate plan in place will typically avoid probate. It will also make your wishes known in case something happens.

Here are some key things to understand.

Estate planning has multiple purposes, but at a minimum:

1. It usually avoids probate where there is a trust involved
2. It usually avoids a conservatorship if you are unable to manage your affairs
3. Where you have minor children, it can nominate guardians for those children
4. It puts in writing your agents for financial and medical decision making should you become unable to make your own decisions
5. It puts in writing your wishes for medical decision making and end of life choices
6. It allows your agents to review your medical files and discuss medical issues with your doctors

Estate planning for most individuals and couples include the following documents:

1. Revocable Living Trust -- this usually avoids probate
2. Companion Pour-Over Will -- this is a back-up document and names guardians for minors
3. Durable Power of Attorney for Financial Affairs -- for almost everything else with money and assets
4. Advance Health Care Directive -- for medical decision making and wishes

That's it. Even those with more complex estates still need these four documents at a minimum. They are the cornerstone of every estate plan. And for most individuals and couples, this is all they need. If you have a much larger estate or complex needs, then your estate planning attorney may recommend additional planning to include insurance planning, tax planning, business entity formation and other kinds of trusts.

But trust me, for most individuals especially those residing in California and who own a home as their largest asset, these are the four documents needed and comprise of the typical estate plan for most individuals and families.

I strongly recommended that this CPA consider putting an estate plan in place for her and husband to avoid probate if something were to happen to them. Losing a loved one is very traumatic and having to deal with the time and expenses of probate will only make it worse. This I know from experience having to deal with probate for my father's estate when he passed away in 2001.

Consider giving an estate planning attorney a call. If you are in Southern California, feel free to email me directly to see if I can assist you with your estate plan.

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Estate Planning, Probate and Trusts involve complex areas of law. Individual circumstances must be considered before any advice can be given.  The general information above is not to be construed as legal advice, which can only be given after consideration of the unique facts of each matter. Please seek the advice or counsel of your attorney, financial advisor or CPA as it may be appropriate.

Trustees for Blended Families.

Estate planning is a must for blended families. Families where there are children from a prior marriage or a relationship need estate planning to make the parents' wishes known and protect all of the children involved accordingly. A three-way marital trust is often advised for blended families.

When setting up a three-way marital trust, one of the conundrums is who should be trustee? Many parents name their two oldest kids -- one from Mom's side and one from Dad's side to serve as co-trustees. Some parents name the most trusted or responsible child as trustee. Some name other family members altogether to serve as trustee.

One thing to consider is to name a corporate trustee (such as a bank's trust department, an independent trust company or private fiduciary) to serve in the event your first and second choice nominations cannot serve. It also allows all of the named successor trustees to voluntarily resign in favor of the corporate trustee named last if administering the trust becomes contentious or otherwise problematic for the children or family members named to act.

As always, discuss your objectives and concerns with your estate planning attorney.

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Estate Planning, Probate and Trusts involve complex areas of law. Individual circumstances must be considered before any advice can be given.  The general information above is not to be construed as legal advice, which can only be given after consideration of the unique facts of each matter. Please seek the advice or counsel of your attorney, financial advisor or CPA as it may be appropriate.

What Do We Do?

Attorney E.J. Hong from Palo Alto, California provided a succinct answer to what we do as individual attorneys: "I'm an estate planning attorney, I do wills, trusts and probate law."

E.J. also provided this additional commentary as to what estate planning attorneys are all about. I read this in one of her email responses from one of the American Bar Association's email lists for attorneys. E.J. graciously agreed to give us permission to share what she wrote:

1.  Estate planning is a happy place.  It beats handling probate or conservatorship or leaving turmoil for your family.  It certainly beats having to fight out a guardianship proceeding because the parents did not have a Will.  It beats your family members having to guess at your medical decisions. It's a happy place because you are in control now. You're alive, you're healthy, you have assets, you have people you love and people who love you. 

2.  Another way to think about estate planning is asset protection. Your assets are you, your children, your business, your properties, all the stuff that you've worked hard for.  Asset protection is protection from probate, conservatorships, taxes, and turmoil.  The federal government may be your favorite charity, but maybe not.

3.  Estate planning is an act of love  - it protects you and your loved ones.  It's like having an insurance policy.  You may not need it right away, but when you do need it, your family will be very pleased that you cared enough to plan ahead.  You also might discover, as my clients have, that making an estate plan actually decreases your anxiety and leaves you with peace of mind. 

-- E. J. Hong

Questions to Ask Your Attorney Before You Hire Him or Her for Your Estate Plan

The local Long Beach legal newspaper, The Reporter, published an interesting article called, "The 6 Questions You Must Ask the Attorney Before You Spend a Dollar on Estate Planning." While we don't want to copy the article verbatim, this post will identify the questions and our answers to the same.

1. How long has the attorney been doing estate plans?

This is an important question. The Reporter said that it takes years to become proficient in this practice area. You want to hire an attorney that knows what they are doing. They have years of experience in this field. They know how to handle probate, related litigation, they know how to administer a trust, and most importantly -- they know what they don't know! If an attorney can spot the issues regarding your situation they can advise you to bring in the expert or seek counsel of a more experienced attorney. At TLD, we have four estate planning attorneys with varying years of experience. We work as a team and for more complex matters, we have ample research materials available and experts on tap if your situation warrants it.

2. Does the attorney understand your needs?

Your attorney should have a real life situation that mirrors yours. In other words, the attorney should practice what they preach. This was posted yesterday -- see the post here. For example, TLD attorneys have gone through the probate process themselves, have kids, have large families, own rental property and a host of other real life situations that you can relate to.

3. Will it cost to talk to your attorney?

The Reporter says to ask how your attorney will bill you. For many clients, our estate planning fees are done at a flat fee basis. So whatever questions you have during the process is captured by the flat fee.

Each of our attorneys are readily accessible by email and welcome such inquiries.

Sometimes a client will have a matter requiring extra attention, specific legal research or addititional work -- for these clients we tell them up front and either quote a second flat fee or charge them hourly. You will not be suprised on how your matter will  be handled from a billing standpoint.

Whether we charge a consultation fee for the initial meeting depends on the attorney you are seeing. You can ask the person who is scheduling your appointment if there will be a fee. If there is a fee, it will be modest and often waived if you retain our firm for services.

4. Is the attorney part of a trust mill?

This is the worst scenario. The attorney runs a daily or weekly ad in the local paper offering estate plans at some low price. This is usually the first indicator that it is a trust mill. There are a few attorneys notorious for running a trust mill in our area. We know who they are.

The Reporter says what is also bad are attorneys who do not do estate planning as a regular part of their practice. The Reporter says, "All they know about estate planning is how to use their software and send out advertising. If you are considering this type of attorney, you're better off with a $100 do it yourself software kit from Office Depot."

5. Does the attorney know about taxes and trust administration?

The Reporter strongly urges that you want an attorney who knows how to handle trust administration when the person has died. The attorney who handles a variety of matters in this practice area will know how to draft trusts, administer them after someone dies, handle related probate and in general help you with strategies to avoid a legal mess later on for you or your loved ones.

Most attorneys do not offer tax advice. But we have close relationships with certified public accountants and can spot tax issues... we can be part of your team that will help address the tax issues arising from your estate plan. We can help explain the tax issues and work with your tax advisor.

We have a strong trust administration practice. See our post on this topic.

6. Will the attorney be there for you, your family and your business?

This goes without saying. But we are saying it... find a firm that has been around. Find an attorney that you like. They can be mutually exclusive.

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Estate Planning, Probate and Trusts involve complex areas of law. Individual circumstances must be considered before any advice can be given.  The general information above is not to be construed as legal advice, which can only be given after consideration of the unique facts of each matter. Please seek the advice or counsel of your attorney, financial advisor or CPA as it may be appropriate.

Even Estate Planning Attorneys Have An Estate Plan

One of the key mantras in life is to do for yourself what you advise others to do.

So, if you meet with a financial advisor with young kids who is pushing an education (Coverdell) IRA, 529 savings plan or other product to save for college expenses -- ask if he or she has their own college expense plan in place for their own children. Same idea for those who sell life insurance or even long term care insurance. (Dare I mention doctors who pitch laser eye correction surgery or derma products like botox?)

Someone pitching a product should wholly endorse the product to the extent that they even have it in one place (or use it) themselves.

Of the four attorneys at TLD who offer estate planning services to our clients, each of us has our own estate plan in place. We feel very strongly based on our experiences as attorneys, whether in practice for 8 years or 20 years, that an estate plan is a must for every individual.

Remember an estate plan for most individuals and families includes a Will (a pour-over Will is often used), a Revocable Living Trust (especially if there is real estate), Durable Power of Attorney for Financial Affairs and an Advance Health Care Directive. These four documents should be in place for every one and updated as changes occur in life. Changes such as divorce, death and new babies often require the estate plan to be updated.

Do you have yours?

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Estate Planning, Probate and Trusts involve complex areas of law. Individual circumstances must be considered before any advice can be given.  The general information above is not to be construed as legal advice, which can only be given after consideration of the unique facts of each matter. Please seek the advice or counsel of your attorney, financial advisor or CPA as it may be appropriate.