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.
WebMD.com is no replacement for a doctor. Likewise, self help websites for estate planning are not the same as working with a professional.
When it comes to legal matters, the question is not, “Is it legal?” The question is, “What are the legal consequences?”
For example, we had a client who came into the office with an internet-generated will. He thought it accomplished his objectives.
On the surface it appeared to, but as we began to talk, I learned that one of his chief objectives was to ensure that there would be peace and harmony among his children after he and his wife passed.
In his case, he had a will alone, which meant most of his and his wife’s assets would eventually go through probate. Thus, a hefty fee to the treasurer was guaranteed for his heirs.
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% of the probate estate. He did not want his children to fight. This provision could frustrate his objectives to ensure that there would be peace and harmony among his children after he and his wife passed. Why?
Let’s ask the proper question. In the above case, what are the legal consequences of providing an executor entitled to reasonable fees?
1. Additional fees to the treasurer because of will-only planning.
2. Potential tension and conflict among his children with regard to the fees.
3. 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 was paid to do all the work? No, it would create an income tax deduction for the estate.
4. 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.
5. Is this what the client would have wanted? Probably not.
6. Will this cause conflict among the children? Maybe.
7. Is this what the client wanted? No.
Let’s assume it is $1 million going through probate upon the second death. The result is a fee of nearly $2,000 to the probate court, extra legal fees because of rigid procedural requirements, and up to $50,000 to the child executor which is subject to income tax.
Perhaps this causes conflict among the children. All of these problems can all be avoided with proper use of a revocable living trust and a direction that a child be reimbursed for expenses but not paid a fee.
In addition, if you direct assets to be left “in trust” for loved ones, they can use and enjoy the property (subject to parameters you define) free from potential loss in a lawsuit and you can guarantee it will stay in your blood line.
In every case, these types of questions should be posed. Without proper representation, these questions might never even be considered. There are a myriad of other examples and issues that need to be considered in every case.
Mark F. Winn, J.D., Master of Laws (LL.M.) in estate planning, is a local asset protection, estate and elder law planning attorney. mwinnesq.com