I Revamped My View on Core Estate Planning

I try persistently in all aspects of my life and lawyering to test and challenge my assumptions and ideas.  Particularly in my law practice, I am open to self-criticism in order to expand my ideas and effectiveness as a lawyer.  I know fairly accurately what I do well;  I am more interested in learning and pondering what I do not do well, or what areas of change or improvement might work better for my clients, etc.

I spent years in the large law firm environment providing complex, trust-design planning for clients. I commented often at that time that putting clients in the most complex estate planning was easier than discerning more specifically what the particular client might not need. It was proper (and easier) in many cases to recommend for a wealthier client the broadest range of planning options, with much less need to stop, consider, and pick-and-choose, what might not be needed for the client. These are clients typically in the top 5-percent of net-worth, etc.

And for these wealthier clients, there were (and are) tax and non-tax benefits of placing those clients in the most complex planning available, including lifetime trusts, full GST (generation skipping planning, etc.), QTIP marital trusts, reverse QTIP trusts, defective grantor trusts, etc.

However, for the bulk of other clients not in the top 5-percent range, I now do not believe simply applying the all-complex approach is suitable. Furthermore, the more complex planning brings with it comparably more responsibility for the client to make sure he or she has named suitable advisors who will carry out the complex planning, including particularly the experience, skill, competency and trust of the named trustees, etc.

Bottom line, in all cases I do not recommend lifetime trusts for a client’s children when both parents die, unless there are specific circumstances that warrant the extended trust planning. What I recommend in many cases are lifetime trusts for the parents with thereafter an outright distribution to the children at age 30, but with the parents’ estate planning documents including — if later necessary — the power to make distributions in further (continuing) trust at the second parent’s death.

This later-trust feature provides an option to establish extended trusts for the children at that later time, if a child is under threat of divorce, lawsuit judgments, failed businesses, personal guarantee issues, etc. The key point is this trust decision can be made at that later time.

This later-trust feature also gives the children the responsibility of their own estate planning upon the death of their parents depending on the circumstances at that time. I, as a parent, believe that giving our children the power of independence and autonomy is a gift that goes well beyond a dollar valuation.

This simpler approach, however, of not using lifetime trusts for children does not eliminate a client’s need to review and consider the use of advisors and the naming of trustees.  Some of us also have personalities that result in a “I can do it all myself” perspective that can cut against a more open mind to the selection and use of advisors / trustees.

Why, if I speak above about a simpler approach to estate planning, do I suggest the selection and use of advisors / trustees?  The reason for each of us, whether later as a result of age-related disabilities or death, ultimately will not be able to “do it all” ourselves as to the functions where advisors / trustees can be significantly helpful. This ultimate need for assistance from others will arise regardless of the complexity, simplicity, or absence of our estate planning.

As to the selection of advisors, there are an abundance of individuals (attorneys, accountants, investment advisors) who, frankly, are not that good at their work. In my opinion, they are more focused on making the sale rather than on their services. There also are advisors, in my view, who are smart, but at the same time, to put it bluntly, stupid. These are not mutually exclusive terms.

And, although the question of trustee selection often centers on the naming of successor trustees who will step in later (if necessary), I strongly suggest that clients (e.g., parents) begin today developing relationships with both advisors and trustees. Begin observing now an ongoing demonstration of an advisor or trustee’s competence and trustworthiness.

Of immediate importance for this client advisor-review process are investment advisors and CPAs.  Lawyer  relationships are also important;  but for most clients the hope is they will use a lawyer only sporadically.  By contrast, the ongoing threat of investment losses and schemes (e.g., Madoff scams, elder financial abuse), in my view, can wreck a family.  Having someone you trust to help oversee your investments is essential. CPAs are also crucial in helping to avoid costly, cumulative tax return and compliance problems.

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