and co-workers. “My lawyer charges too much.” “My lawyer never returns my calls.” “I paid my lawyer a retainer months ago, and I haven’t seen any documents yet.” And on and on.
Of course, there is nothing to stop you from giving it the old college try. In fact, you will find a lot of help. There are a host of how-to books, software programs, and stationery forms, replete with terms and provisions that you can pick and choose to incorporate into your own Living Trust.
In all my years as an inheritance-planning lawyer, I have met with hundreds of do-it-yourselfers who have paid me a fee to review their efforts. Yes, that does sound inconsistent. Why would they want to pay me a fee to review their self-drafted Living Trusts when their main goal was to avoid paying me a fee in the first place? Their answers were universally the same: “I just wanted to be sure that everything is legal.”
Let me tell you something, and please consider this your first piece of my advice. If you prepare your own Living Trust, it will be wrong in some way, shape, or form.
Maybe it will be a harmless error, such as explaining estate tax concepts with outdated language. Does your Living Trust use the term A-B Trust to incorporate the plan of preserving the deceased spouse’s applicable exclusion amount? That is the right concept, but the wrong words. The use of the wrong language will not be fatal to that tax-saving plan, but the Living Trust is, technically, still wrong.
Maybe the mistake will be overkill. Several times a year, I review self-drafted Living Trusts that contain complex tax-reduction plans that would be appropriate only for the heads of Fortune 500 companies. But the persons who drafted those Living Trusts are nowhere near that wealth category. If those persons die with those plans in place, their beneficiaries will be stuck in a morass of expensive and unnecessary processes.
Maybe the mistake will be fatal to your children. One man came into my office explaining that his son was a drug addict. After reviewing the Living Trust he prepared with the help of the Trustmaker software program, I said to him with all the sarcasm I could muster: “Why does your Living Trust leave your drug-addicted son his inheritance share outright and under his full control? The second he gets his inheritance, he’s going to turn it over to his pusher!”
After having reviewed hundreds of self-attempted Living Trusts, I have never seen one that has been correct, complete, or appropriate for the circumstances. It doesn’t matter how smart you are, and what you do for a living is irrelevant (unless you are an inheritance planning attorney). There are too many subtleties and intricacies concerning your inheritance instructions in the Living Trust that the how-to books just don’t pick up. You don’t realize this because, in a circular bit of reasoning, the how-to books have not made you aware of them. In other words, you don’t know what you don’t know.
When your clients tell you that they have a Living Trust, your follow-up question should always be, “Did an attorney prepare that Living Trust?” If the answer is no, tell them that out of an abundance of caution, they should have it reviewed by an attorney. Expect the response to be of the “We did this on our own to avoid attorney fees” variety. To that you say, “No matter how much energy you poured into your self-drafted Living Trust, you just don’t know if you drafted it correctly. One mistake could lead your family into post-death chaos. One meeting with an attorney to review your Living Trust will give you the peace of mind that you didn’t miss anything.”
The only true way to learn about the dos and don’ts of the Living Trust is the hard way – from on-the-job training. That is why my profession is called the “practice” of law. We get to practice this stuff until we get it right.
For example, when I was a young attorney, I was innocent in my approach to drafting my clients’ inheritance instructions in the Living Trust. When my clients told me there would never be any inheritance conflicts between their children, I believed them. After all, who was I to dispute my clients’ conclusions about their children?
Nothing, however, prepared me for the harsh reality of human conflict when my clients’ perfect children divided their inheritance. Lawyers are not taught to recognize inheritance conflicts in law school. There are no advice books or classes on this subject. The only way I learned about inheritance conflicts was from having a number of clients die and then dealing with their children when they divided the family money. Having observed what happens between children following their parents’ deaths, I have arrived at this indelible conclusion: Your children might seem perfect – but you really don’t know them until they divide your money.
You Might Have Living Trust Training, but You Haven’t Been Trained My Way!
These experiences with both lawyer-prepared and self-drafted Living Trusts caused me to arrive at the sweeping generalization about how little you know about the Living Trust, even if you have one. A ton of people have been to Living Trust seminars, read Living Trust books, downloaded Living Trust software, and attended complimentary Living Trust consultations. Another ton of people have Living Trusts. But, those same tons of people still possess a definite and palpable thirst for knowledge about Living Trust basics.
In order to answer the questions of these many bewildered, misinformed, and mistaken people, I’m back with this, the revised edition of my second book, which is about living and dying with a Living Trust. I like to refer to it as “The Living Trust’s Greatest Hits.” In other words, this book presents everything you need to know about the establishment, maintenance, and management of a Living Trust at all stages of the game. Why should you pay thousands of dollars for a Living Trust just to have no meaningful and practical understanding of what may be the most important document of your life?
If you think you know everything about your Living Trust because your lawyer explained it to you – or you read the guidebook that came with the software – you don’t!
If you think you don’t need training on your Living Trust because you’ve already received that training – you do!
You have not been trained in your Living Trust my way. My way is to show you what you need to know before your Living Trust is set in stone. It will follow the flow of your money and property in the Living Trust at all stages of the game: while both you and your spouse are alive, then after the first spouse dies, and then when the last spouse dies and distribution is made to your children and grandchildren. The chapters that lie ahead explore aspects about your Living Trust that your lawyer – or software – never or inadequately explained to you.
So, just when you thought you were done with all matters Living Trust, I’ve pulled you back in. The Living Trust is back, baby! And I, your Living Trust advisor, will help you get through it.
CHAPTER 2
What Does the Living Trust Do, and How Does It Do It?
Or, The Best Explanation of the Living Trust You Will Ever Get
I have attended (snuck into?) some of the Living Trust seminars conducted by my colleagues. I have heard them take more than an hour to describe what the Living Trust is and how it works. Maybe you have been to one and wondered why you are sitting in a hot room for over an hour, listening to someone talk and talk about the purpose of a Living Trust. In this chapter, I will tell you – in three to five minutes – what a Living Trust is and what it does.
As you listen to my advice, I would ask that you forget everything you have ever heard about the basic mechanics of the Living Trust, even if you have one. If you focus on my explanation of the Living Trust – that it is simply an after-death power of attorney – you will guide yourself out of the legal haze thrust upon you by the Living Trust’s multiple pages filled with legal words that we lawyers have to use so the document can qualify as a legally correct trust.
