With the pervasiveness in our society of do-it-yourself everything and the promise of fast, cheap and easy legal documents created at the click of a mouse, the public needs to beware.
Just as WebMD .com is no replacement for a doctor, do-it-yourself estate planning is no replacement for an attorney.
When it comes to legal matters, the question is not “Is it legal?” The question is “What are the legal consequences?”
For example, let’s assume a client comes into the office with an internet-driven will. He thinks it accomplishes his objectives. On the surface it appeared to, but as we begin to talk, I learn that one of his chief objectives is to ensure that there will be peace and harmony among his children after he and his wife pass.
Since he has a will alone, most of his and his wife’s assets will eventually go through probate. Thus, a hefty fee to the Treasurer is likely.
As we talked, I was perusing the will, and I explained to him that “reasonable fees” in South Carolina to the executor could mean 5 percent of the probate estate.
He did not want his children to fight. This provision could frustrate his objectives of peace and harmony. Why?
Well, let’s ask the proper question. So, in the above case, what are the legal consequences of providing an executor who is entitled to reasonable fees?
- Additional fees to the Treasurer because of will alone planning.
- Potential tension and conflict among his children with regard to the fees.
- Would these fees be subject to income tax? Yes, it would be earned income to the executor. Would they be subject to income tax if the attorney were paid to do all the work? No, they would create an income tax deduction for the estate.
- Is it fair for the executor to be paid a fee other than reimbursement? Not if the executor hires an attorney to do the work and gets paid anyway.
- Is this what the client would have wanted? Probably not.
- Will this cause conflict among the children? Maybe.
- Is this what the client wanted? No.
Okay, let’s assume it is $1 million going through probate on second death. The result is a fee of nearly $2,000 to the probate court, $50,000 to the child executor for pay.
Oh, and this $50,000 is subject to income tax. Also, perhaps, this causes a conflict among the children. If all this happens, the original objective (peace among the children) was not accomplished.
Remember, when it comes to legal documents, the real question should be “What are the legal consequences?” – something do-it-yourself estate planning is unlikely to address.
Mark F. Winn, J.D., Master of Laws (LL.M.) in estate planning, is a local asset protection, estate planning and elder law attorney. www.mwinnesq.com
