Archive for August, 2009
ESTATE PLANNING HORROR STORIES FROM THE REAL WORLD (#4)
“Use of Legalzoom Results in Legal Mess.”
This week’s story involves a young woman who died prematurely from cancer. When first diagnosed with cancer, she decided to prepare her own Will using Legalzoom.com. She actually succeeded in preparing a “legal Will”, which complied with all of the witnessing formalities required by Florida law and which named her brother as the personal representative of the estate. Unfortunately, without having been counseled on important legal issues, her “legal” Will has created many problems for her family.
This young woman left behind three minor children, ranging in age from 11 to 7. She left her entire estate to be divided equally among the children. The children also were named as equal beneficiaries of her life insurance policy. She had long ago divorced the children’s father and he had not been involved in their lives. The first legal issue which this woman did not understand is that minor children cannot legally own property or control money.
As a result of the language in the will form she used, it will be necessary to have all of her money and property, including the life insurance proceeds, distributed through the probate court and it also will be necessary to establish a court-supervised guardianship of the children’s assets. This will impose unnecessary expenses on the family and a delay in the children receiving the life insurance proceeds. Additionally, when the children reach the legal age of 18, they will be handed their share of the guardianship money and property whether or not they are mature enough to handle those amounts. With proper counseling that money could have been protected from the children making rash spending decisions.
Because everything was left to the children equally, if one child gets sick or hurt, or another child has problems in school, the guardian will not be allowed to give more funds to the child who most needs them. Is that the way you would raise your children? If one child needs braces or a new pair of shoes, do you get them for all 3? By not counseling with an attorney to learn about ways to allow the guardian to have more flexibility, that opportunity was lost.
Another huge problem is that the Will does not clearly identify who the young woman wished to be guardian of her children’s property. She may have thought that naming a personal representative of the estate was the same thing as naming a guardian for her children, but it is not! This leaves open the possibility that the children’s father, with whom the woman and her children had no contact and whom she would never want to have control of one penny of her money, may become guardian of the children’s property. Unfortunately, this could lead to a contested guardianship proceeding between the woman’s brother and the children’s father for control of the children’s money. Such a fight would serve only to further divide the family and drain the children’s estate. Although the father is presumed by law to be the guardian of the person of the children, (i.e. the person to raise and look after them), the mother could have named someone else, such as her brother, to control the children’s money and property, so their father could not spend it on himself or otherwise misuse it.
With proper counseling and at a reasonable cost, a trust could have been established for the children which would have avoided both the extra expense and delays of the probate process and which would have named specific guardians and trustees to handle the money for the children’s benefit. The money could have been kept in one pot to be used as needed until all the children were grown and then could have remained in a trust for each child after each child reached 18, so as to prevent those assets from being squandered at an early age.
These issues all would have been addressed during the estate planning process at the Cramer Law Center. As Legalzoom itself says: “Legalzoom’s legal document service is not a substitute for the advice of an attorney”… “The legal information on this site is not guaranteed to be correct, complete, or up-to-date.”
(Link to full disclaimer: http://www.legalzoom.com/universal/disclaimer.html )
After all, it’s NOT ABOUT DOCUMENTS, it’s about results!
ESTATE PLANNING HORROR STORIES FROM THE REAL WORLD (#3)
“YOU GET WHAT YOU PAY FOR”
Everyone has heard the saying “you get what you pay for”. Although often used as a cliché, this week’s story reveals how it applies in the world of estate planning.
An 88 year old gentleman currently is suffering from dementia (a progressively worsening loss of brain function). In 2005, however, he had the foresight to have prepared a Revocable Living Trust and Durable Power of Attorney containing healthcare surrogate provisions. Our frugal gentleman shopped around Duval County for attorneys strictly by price and eventually found an attorney to prepare both a Revocable Living Trust and Durable Power of Attorney for a total price of $750.00. Our frugal gentleman had two children, a son and daughter. He was close to the daughter, but alienated from the son. He named the daughter as trustee of the Trust and gave her authority over his finances under the Power of Attorney. The gentleman’s home, which formed the bulk of the estate, was left to the daughter with the remaining assets to be distributed equally between the two children.
As the gentleman’s mental health deteriorated, the daughter assumed responsibilities under the terms of the documents until such time as she could no longer adequately care for her father and wished to place him in an assisted living facility. She consulted the son, who after years of being absent from his father’s life, now declared that it would be cruel to place the father in an assisted living facility and that he would take care of his father, so long as he would be paid a monthly amount equal to that which the daughter previously had been spending for home healthcare. The daughter did not agree with these demands, so the son filed a petition in the probate court to have his father declared incapacitated and for him to be named as the guardian over his father’s person and property. This has resulted in three (3) attorneys being involved, one for the son and one for the daughter and a court-appointed attorney for their father.
The Revocable Living Trust was eleven (11) pages long. The combined Durable Power of Attorney and Designation of Healthcare Surrogate was four (4) pages long. Neither document contained any specific language giving the named trustee the power to transfer our frugal gentleman in or out of an assisted living facility, nor did it provide specific power for the daughter to decide where the father would live. Although Florida Guardianship Law looks to Revocable Living Trusts, Powers of Attorney, Designations of Healthcare Surrogate as “less restrictive alternatives” to guardianship, because these documents were so sketchy and contained no specific provisions that would answer the questions presented to the guardianship court, the probate judge did not immediately grant the daughter power to act under the documents, but instead ruled that there were unanswered questions of fact and he would have to hold a trial to determine whether to uphold the documents or instead declare the son as the guardian.
Just to respond to the guardianship petition and present papers to the Court, the cost of the “$750.00 Trust” has now risen to $8,000.00 and counting. In order to continue litigating the matter, with three (3) attorneys charging fees, the cost will increase!
The attorney who prepared the “bare bones” documents spent only twenty (20) minutes with our frugal gentleman in both the design of the Revocable Living Trust and the explanation and signing of the documents. They did not discuss the family situation in any detail. Despite a life long history of problems with the son, the father neither took the time nor spent the money to develop a plan that would prevent the destructive litigation now going on between his son and daughter, and the attorney never asked any questions about the family relationship. As you can see, it is not about documents, it is about results! As this story illustrates, poor planning can produce results just as bad or worse than no planning at all!
You decide: Was the “$750 trust” a bargain?
Naming Guardians For Your Children
Just read an interesting article at http://www.miamiherald.com/living/family/story/1175433.html. It reminded me not only how important it is to name a guardian for your minor children should something happen to you, but also how difficult making this decision can be. Compounding this difficulty is the fact that many parents make at least one of six common mistakes when naming a guardian. Obtaining good legal advice and counselling throughout the process can help eliminate mistakes and lessen the stress of the decision. At The Cramer Law Center we specifically focus on the needs of parents who face decisions as to how to best plan for the future of their minor children.
The Astor Saga Continues
I previously have commented on Mrs. Astor’s estate planning mistakes. http://cramerlawcenter.com/wp-admin/post.php?action=edit&post=328. New developments continue to occur.
The criminal trial of Brooke Astor’s son and his attorney has entered its 15th week. A handwriting expert has testified that Mrs. Astor’s signature was forged on a 2004 codicil to her will. Where will it all end? To read more, follow this link. http://cityroom.blogs.nytimes.com/2009/08/05/writing-expert-says-astors-signature-was-forged/?hp.
Use of Trusts isn’t new.
A study of wills in the old south revealed that nearly 40% contained trusts. Trusts are neither a new nor an exotic estate planning tool! Testamentary trusts (trusts set up within a will) provide that assets distributed after death may be held in trust for certain purposes. Living trusts (trusts set up during a person’s lifetime) provide the additional benefit over testamentary trusts of including provisions to deal with issues that may arise during a person’s lifetime such as detailed disability planning provisions. To read more about the study click here: http://www.thefacultylounge.org/2009/08/the-new-technologies-of-the-antebellum-era-steam-and-trust.html.
Mrs. Astor Regrets
This week I thought that I would share with you some comments on an interesting book I just finished: Mrs. Astor Regrets by Meryl Gordon. This is the story of Brooke Astor, the last Mrs. Astor, who lived one hundred and five years before passing away in August, 2007. The book is captivating because it tells the story of one of the richest women who ever lived and is full of anecdotes about the rich and famous. The Rockefellers, the Whitneys, Henry Kissinger, Tom Brokaw, and Oscar de la Renta are just a few of the famous names that moved in and out of Brooke Astor’s life. These stories alone make for fascinating reading.
However, it is the subtitle of the book “The Hidden Betrayals of a Family Beyond Reproach” that makes the book riveting. Who really expects or plans to live to age 105? What happens when an 80 year old son is tired of waiting for his inheritance?
When John Jacob Astor went down with the Titanic, he left $87 million to his son Vincent. Vincent later married Brooke. When Vincent Astor died in 1959, he left an estate worth over $120 million. $60 million was left in trust for his wife and another $60 million was left to the Astor Foundation. Brooke Astor was well known for her active philanthropy as the head of the Astor Foundation. Over the next 40 years, she gave away $200 million to New York City charities, making her the most influential person in the City. She also lived the “good life” and thought nothing of wearing a $250,000 necklace when dressing to go out for dinner.
Brooke Astor lived a vigorous and active life right on through her 100th birthday party, but her mental and physical health then began to deteriorate. Her last years of life became tragic because she did no disability planning. The richest woman in America did not have a Revocable Living Trust. Instead, her estate planning was confined to a Will and many codicils (she changed her Will 38 times).
As her mental health deteriorated, her only son “took over” and acted in ways that ultimately resulted in his being indicted on criminal charges of elder abuse and theft. He cut his mother’s staff, shut her up in her Park Avenue apartment, isolated her from her friends and seriously diminished the quality of her healthcare. As a result, her close friends, led by Annette de la Renta, filed a court petition to have a formal guardianship established. Needless to say, the filing of this guardianship petition was heaven for the tabloids and the family tragedy was page-one news in every New York newspaper. Eventually, Annette de la Renta was appointed as Brooke Astor’s guardian and Mrs. Astor’s last year of life was made more tolerable.
The irony is that the world’s richest woman could have avoided this entire spectacle had she planned for disability by establishing a Revocable Living Trust, leaving specific instructions and appointing someone she trusted to administer her affairs according to those instructions, if she became mentally incapacitated. Her failure to do so resulted in a family tragedy of Shakespearian proportions, tabloid headlines, millions of dollars of attorney’s fees and her only son being indicted. His criminal trial is going on right now, providing more grist for the tabloids’ mills. see: http://www.nypost.com/seven/07082009/news/regionalnews/manhattan/marshall_collapses_in_courthouse_mens_ro_178228.htm
All of this could have been avoided by a common estate planning technique that is readily available to everyone, not just the mega-rich. Don’t let a similar family tragedy occur to you, your friends, or clients. Everyone needs to plan for the potential of being alive, but mentally incapacitated. Estate planning is not just about what happens after death. Brooke Astor’s final years are a fascinating testament to this fact.