Bar Stool Advice

Regularly we have people come in who made legal decisions for themselves based on what they heard at work, or at church, or sitting on a bar stool. It doesn’t seem to matter at all that the co-worker, minister or drinking buddy has never practiced law and in all likelihood lacks a license to do so. Usually things are a lot worse after following the layman’s advice.

The ultimate bar stool of course is the internet. Apparently because this medium is a source of reliable information some of the time the unreliable publisher gains the same credibility.

Even when credible, following up on the information can be dangerous. I am sure there are instructions on how to fly an airplane on the internet. Getting a plane, taking off and navigating to a safe landing is something else entirely.

Worse, I was seeing my doctor this week and I asked him how often people came to see him having first self diagnosed on the internet. “Daily” he said.

Tomorrow I see my dentist and I will ask him the same question. Can you imagine, “Do It Yourself Dentistry”? All I can recommend ( and this is not legal advice) is considerable time on the bar stool before attempting the same at home. Be sure to have the cab that brought you there wait because you are going to need to go to the ER after a few minutes.

Night of the Living Trust

What seemed like a good idea at one point often becomes an unwanted “person” that lives on and makes everyone miserable.  Like Zombies, trusts that have outlived their usefulness need to die, but because the residual beneficiaries may not like the idea of a trust being killed off in favor of the person who wrote it to begin with, the Trustor, the resolution of its life moves slowly and infects people with despair. It also infects them with a dislike of lawyers and the entire complex business of dying. Why cant it just be simple? Because it isn’t.

Often the lawyer wrote this thing but they had good reason to; the client came in certain this is what they wanted. Just as often and perhaps more likely they never consulted a lawyer who might have persuaded them that the effort of a living trust is too much. For example usually people forget to put everything they buy into the trust defeating a purpose of avoiding probate.

Most tragically the do it yourself Trustor may forget to make this a revocable trust, meaning the family members obtain a real interest in the property they are residual beneficiaries of when he funds the trust, even before the Trustor dies. This means they all own a piece of the living trust. The remedy is to get everyone to agree to give the property back to the man who made the mistake in the first place.

But lo, there may be a beneficiary out there not willing to let go and hence, we experience the horror of the Zombie Trust.

Be afraid, be very afraid.

Where The Bourgeois Should Not Die

In my business this is considered forum shopping, but if you have any real money at all, defined as more than $2 million dollars, please do not die in Washington State. An aggressive tax scheme begins at that point.

Some other bad places for your family but good for the tax collector are Oregon, Minnesota according to the anecdotal evidence which has washed up on the shores of Puget Sound and found its way to my office.

On the other hand if you are worried not about taxes but instead just want to die easy and see your family have your worldly goods sooner than later, avoid California and Florida.

This assumes you can plan your own death. How bourgeois.

Dead Stick Control

In 2001 the legislature of the Evergreen State elected to extend the Rule against Perpetuities to 150 years. It had been 21. What that meant that anyone you wanted to have inherit your property had to be born within 21 years of your death. Now you can extend your dead hand well into the future. But should you?

Real Property, as we have come to understand, does not always go up in value. Neither do stocks, although the people who sell and trade them would argue with me. Do you really want to lock the trustee into holding stock for 150 years?

Will what you write out today make any sense when it is time for the trust to pay out? 150 years is a long time. Lots can change.  Stock in buggy whip company for example in 1861 would be worthless today. With 150 years to stretch out property, this means a soldier in the American Civil War dying at the First Battle of Bull Run, in July 21st 1861 could literally leave his property to a baby born on or before July 21st 2011.

What is really volatile however are social values. Consider the “Parentage” statute was until a few years ago called the “Paternity” statute, because until then maternity was a matter of fact whereas paternity was a matter of opinion. It is no longer so.  And for generations the statute came under the title of “Bastardy”.  We don’t use that term any longer, and instead society has apparently agreed to accept and pay for the results of all this free love. Can you imagine if our Civil War soldier tried to control the behavior of his descendants 150 years later?

What if that trust placed prohibitions on consumption of alcohol or tobacco as a condition of that child receiving his money? Perhaps the soldier could have prohibited the baby from owning slaves. Perhaps he could have conditioned the trust payments on choice of mate for his heir being a certain religion. Or maybe he just wanted to make a point about values that seem to be important to just about anyone living a life in America.

It is said it is still the case in the State of Louisiana when a young man declares he has chosen a bride there are three questions; Whose her Daddy? Is she Catholic? and Can she make a rue? From the perspective of a father these are good questions. They are also good questions from the perspective of a great-great-great grandfather.

It’s Not Your Money

Sometimes even the most seasoned lawyer is shocked by the conduct of people, often those in their own family.

I am just fresh from the probate and guardianship calendar where I witnessed an institutional trustee, a bank no less, hand up an order approving expenditures from a child’s special needs trust that was rejected immediately by the bench.  Instead our Court had lots of questions about why it was necessary to spend in increasing amounts tens of thousands of dollars taking the extended family on fabulous trips to Mexico and the Caribbean.

Meanwhile the needs of this special needs child who apparently had been left quite a bit of money in a will seem to be glossed over.

The really remarkable thing was the bank seemed unphased by this spending. Usually I see this kind of conduct from individuals named as trustee, because the term “fiduciary” is not part of their lexicon. Webster defined fiduciary as one who holds the trust or confidence of another. The first known use of the term is from 1641, and derived from the Latin fiduciarius which sounds a lot like fidelity to me.

I wonder what the Latin is for “taking advantage of the helpless”? And what about the bank, what Latin term can we assign them? There is no Latin term for “clueless”.

Happiness for Lease

We all go a long way to have a slice of paradise. We go even further to leave it to our family when we pass. Into my office people come with revocable living trusts which are supposed to pass the timeshare at death. Mostly a step has been missed somewhere, and instead the asset is thus subject to an ancillary probate in far off Florida or Hawaii. Sometimes the owner of this rented happiness is still alive when they see me, and we can make a fix.

I have come to see the vendors of these places understand the need we all have to at least believe there is a simpler, slower time for all of us, if we could just find it. These vendors of happiness are waiting for us.

These properties all have names that evoke some kind of earth bound heaven; Island One, Palm something or other, Fairview, Fairshare, Fairwinds, Fair(insert adjective, verb or noun ) its all very fair. Can’t you see that for only about the price of a new car you can have happiness even of it is for just a few days a year? Like autos, the value drops precipitously when you drive it off the lot.

Often the names recall a golden age of sail or perhaps the perceived simpler life of the Caribbean. It is a chance to be your own Jimmy Buffett, and check out of our tragically bourgeois existence. Or perhaps we feel an exclusiveness because the timeshare anchor we bought into features the word “club” e.g. Wyndamn Club, Ocean Club, Bay Club, Penthouse at the Club,  et. sequitor.

What people believe it seems, when they sign the papers for a tiny bit of dirt on a beach for a short period each year, is that this will be the answer, the escape from the dreary life we have here in the rain. I wonder if they are right, but I doubt it. Sometimes they come to see  me to try to get out of the contract. Sometimes the heaven they bought is just hell on earth. Wouldnt a really expensive hotel room every so often been a better deal?

I will stick with the six Jimmy Buffett CD’s in my car’s stereo. Someone has to remain behind to mind the store, weighing in on nice ideas gone bad.

True Stories from the Twilight Zone Part 2

Modern medical science is a wonderful thing. I have witnessed with my own eyes how one can be suspended between life and death in that places Rod Sirling used to call the Twilight Zone. Sometimes however we just age into that place of time and space the rest of humanity calls “dementia”.

In this state your Will does not help you. It is a “dead letter” until you yourself are dead, then zombie like the Will comes to life.

So what do we do in the Twilight Zone? Once there, you are not competent to sign anything that anyone will recognize. Instead someone, often a family member launches a guardianship proceeding. This takes at least two lawyers and the associated cost; one to file the petition and one appointed by the Court to act as your guardian ad lietum.  If in your demented state you declare you are not a danger to yourself financially or physically a third lawyer is assigned and we may end up in trial.

I have been such a third lawyer. Even though it was clear my client was hearing only the signature strings of The Twilight Zone we spent a day in trial. Washington’s guardianship statute does not give the third lawyer the latitude to concede defeat, he must go to trial.

And so on a sunny day in early May I spent my time in trial with my elderly client who wandered around the courtroom during the proceeding, hollering things like “There is the Judge, on his Altar!”. ( Some lawyers I know might say my client wasn’t so demented after all.)

The cost of all of this was well over $10,000 to the client. The experience: priceless.

The take away from all of this is there has to be a better way. Is there not a means to convey to some trusted person or people a means to handle financial and health care decisions when you cannot? The short answer is yes.

1) Durable Power of Attorney. The power of attorney means you hand someone else the authority to work for you in your place. It is “durable” because it survives your incapacity or dementia. Otherwise if not referred to as durable, the law says that paper lapses because you are no longer able to revoke it when you are in the Zone.

This document can be effective immediately, leaving open the chance someone might use it a little too early, or “springing” taking effect when you can find a doctor willing to say in writing you cannot handle your affairs any longer.

The revocation and reassignment of this authority as dementia approaches is the stuff of legend in my business, leading to that court fight and perhaps guardianship you tried to avoid in the first place.

2) Care Managed Trust or Revocable Living Trust. This device allows you to put into your own hands as Trustee then the hands of a trusted person as the successor Trustee all your property. It can also take the place of your Will. It is not a “dead letter” as you enter dementia but instead is very much alive and continues to operate as you pass from the Twilight Zone across the Great Divide. It can avoid probate.

I have yet to see one of these instruments come into the office that has not been terrifically expensive to set up, maintain, and in the end, doesn’t have all the property transferred to it, necessitating a probate of the left out property.

All kinds of things happen in the Twilight Zone. The best you can do is make some judgments ahead of entering that dimension of time and space, decide to trust or not to trust, and then live the rest of your life.

Living and Dying in Casual Wear

We have become too casual in America. We no longer dress for dinner, church, or work. Open collar is the look. Someone decided we all wear jeans on Fridays at the office, (everyone except me that is). OK fine, call it freedom or liberty or whatever you like but there is some harsh legal environments we really can’t be causal about.

You may find yourself in a bank, opening a checking and savings account. You are wearing Dockers and a shirt from Lands End.  You may find yourself in the personnel office of your new employer filling out forms about all kinds of things, including your 401(k) dressed in the style of the corporation, which in Seattle means you shop at REI. You may find yourself in your living room, with a life insurance sales man, and a lot of paper, and a lot of distractions and might even be in your pajamas. You may say to yourself, well, what do these have in common?

Death. You are probably making dispositions of what happens to the money you are handling in each situation. Not so casual, is it?

And Death changes things. Conduct that one would never believe possible from friends and neighbors, people you have trusted for years suddenly become crazed with greed when a windfall appears available. Naming your best friend as the beneficiary of any of these instruments tests him “to do the right thing”. He might fail the test. He might decide perhaps you really intended to disinherit your kids. There is little your lawyer can do about it.

Many of us in this practice draft in “superwill” or “blockbuster” terms into the will to fix all these issues with the will, clearly designating where property is to go if you have casually checked some wrong box in scenarios as listed above, but they can’t fix all of them, depending on the State’s statute on the topic. Generally these  super terms in the will won’t fix your causal approach to death if you open that account, are hired at a place that tolerates the REI look or have a visit from the life insurance salesman after the date you have executed your will.

Life and Death. It is time to get serious when you think about both. Dress for the event.

It is called a Trust, but should you trust?

How much of my practice is suing trustees who clearly should have never been trusted? A lot.

People often want to have some control over their money after they die, designating particular purposes for which the money is to be used. To do so one needs a “Trust”. The person holding the money is called a “Trustee”. The Trustee pays the money where the Trust directs it is supposed to go; normally to people or charities called “Beneficiaries”  according to what the person making the Trust, called the “Settlor” has designated.

Because a Settlor perceives that nephew or child really understands money and has the character to do the right thing and follow his post mortem instructions in the Trust, they name him as Trustee. The general perception is the bank or some other professional fiduciary will be expensive. While it is true banks and professional fiduciaries do charge fees, often more than the person making the trust would like, it often pales in comparison to the damage the nephew or child can do when it turns out that Trustee isnt really good with money, or just doesnt do the right thing.

Years after the Settlor has died the Beneficiaries show up in my office wondering where the money has gone. I will tell you where it has gone. Often to a place called “The Casino”. Or the money has been invested in the business of the Trustee himself. These things would not happen if the bank or professional fiduciary was handling the money. Rather than the money going where the Settlor designated or perhaps earning something called  “interest” or “dividends” or otherwise increasing in value,  the losses are dramatic, making the fees of a bank look like a bargain.

Money invested in the Trustee’s own business, or even borrowed by the Trustee is called “self dealing”. Money from the trust spent at the casino is called “theft”.

The really remarkable aspect of these events is the Settlor has worked his whole life to build this estate, then potentially throws it away by chosing a Trustee that may or may not do the right thing, act like a prudent investor, or otherwise take on the task of managing the trust.

We see this in guardianship often as well, when the incapacitated person is fleeced even by a court appointed family member. Yet most of the complaints I hear is about the fees of a professional guardian appointed  when no family member appears suitable. It is as if the Settlor of the Trust and his family would rather see the money squandered rather than pay someone unrelated to manage the money with competence.

I am still puzzled by the phenomenon.

OK that’s enough for now, I gotta go.

“If something should happen to me …”

This is the opening line I hear from every estate planning client. “If something should happen to me….” and they go on to describe what they want to see happen with their property, I presume, when they die.

“If” is how this sentence starts. What do you mean if? Don’t you mean “when?”

“Something” means death. The ambiguity is not necessary. I suppose I could ask, “do mean if you should find you have a parking ticket, then all your worldly goods are to be distributed to your family?”  This is after all something that could happen to you.

“Should happen to me” makes it personal. Yes, of course that is why it is called a “will”  as opposed to a command to someone else. If we really could tell people what happens to their property at death I suppose we could call it a “shall”.

Actually this happens in bank lobbies all over America every day. Often people getting on in years will take a trusted adult child or nephew to the bank and “add them to the account” so that when they no longer can pay bills due to age or infirmity their bills get paid rather than executing a durable power of attorney. Now they really don’t want to impact what happens at death when they do this, but the bank employee will often take it upon herself to check the box on the little card attached to the elderly persons account which reads “joint tenants with right of survivorship”, setting in motion a sure bet family fight that will last a generation.

When this happens the will no longer controls that money, instead at the instant of death the trusted child or nephew is suddenly enriched by whatever is in that account. When later asked why she did this the bank employee invariably responds “That is the way we always do it”.

In Washington State we have a statue called the “Superwill” which if mentioned in the will the lawyer drafts there can be a fix of all these prior “shall’s” imposed by bank employees prior to the date of the will. Unfortunately when the elderly person later forgets they have executed a will, and ask the nephew to take them to the bank later in time, this marvelous legislated fix is undone. The elderly person dies, the family discovers what has happened, then what are the lawyers to do? Let the games begin.

OK that’s enough for now. I gotta go.