Do “DIY” estate planning at your own risk

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AN you draw up your own will?

Sure – and while you’re at it, why don’t you take out your own appendix, do a complete engine overhaul on a 747 and come up with a cure for cancer?

OK, I exaggerate – a little. And I admit I’m probably slightly biased on the issue of people relying on “DIY” or off-the-shelf wills.

As a practicing attorney in the area of estate planning and elder law, I like to think that those years I spent in law school (not to mention the thousands of dollars in tuition I spent), my attendance at continuing legal education classes and my years of experience in the practice of law count help me provide clients with something of value … something they can’t get in a $10 fill-in-the-blanks will kit from an office supply store or off the Internet (Bob Shapiro, I’m lookin’ at you – but more about that later).

But I’ve also learned over the years that some people, for whatever reason, have the same kind of aversion to paying for legal services that they do to, say, eating asparagus. They just find it distasteful. It may even activate their gag reflex.

If you test positive for Attorney Allergy, I offer my condolences, and a few tips to confirmed “DIY-ers” to help alleviate some of the stress that will be visited upon your heirs, yea, even unto the third and fourth generation:

·         First of all, wills in Washington, like nearly everyplace else, require two competent witnesses, a concept most people are familiar with. But if your “DIY” or off-the-shelf effort leaves it at that, you could be creating unnecessary headaches for your heirs after you have slipped the surly bonds of earth to touch the face of God. If the will doesn’t also include an Affidavit of Attestation – acknowledged by a notary who witnesses the witnesses’ signatures – it is not “self proving” and cannot be admitted to probate in the Superior Court without additional evidence being offered. Such an affidavit can be executed when the will is offered for probate (meaning, after you die), assuming the witnesses are available. If they aren’t, your personal representative (the person you name to administer your estate) may have to jump through all kinds of hoops to establish the validity of the will. Good luck with that.

·         Do you want your personal representative to be able to act without court intervention or posting a bond? If so, the will should state that. Your personal representative can petition the court to obtain nonintervention powers and waiver of the bond – but may have to hire a lawyer to do so. And you’re the one who hates the idea of paying a lawyer … remember?

·         Finally, does your plan of distributing your property include a “Plan B”? What happens if a beneficiary you name to receive part of your estate dies before you do? Does that distribution get passed down to his or her heirs? Or does it get put back into the pot and distributed pro-rata to the other beneficiaries you name in your will? Failing to account for contingencies could leave you with results you didn’t contemplate, or desire.  

I promised I’d get back to Mr. LegalZoom. Bob Shapiro. If he was good enough to get O.J. off, isn’t he good enough to do your will?

Here’s the thing – when you get legal documents from an online source such as LegalZoom, you’re getting just that – legal DOCUMENTS, not legal REPRESENTATION. Bob is not your lawyer. He may have battalions of attorneys tapping out form wills and trusts 24-7 in some boiler room operation. But you take a risk that the documents such a service provides are actually the ones you need – and contain the provisions that will carry out your wishes. And if something goes wrong down the road, neither Bob nor his minions – or their malpractice carrier – will be there to bail you out. Because, as I said, Bob isn’t your lawyer – he is a document provider.

Now, in the interest of full disclosure, I have to admit that, yes, I have seen a few form or “off-the-shelf “wills come into my office that actually accomplished what the “testator” – the person making the will – intended. But I have also seen wills with omission and ambiguous clauses that created all manner of mischief to be undone. At that point, you’ve got the grandson and the nephew ready to square off on cage match over who gets the John Deere tractor or the Civil War-era flintlock pistol. The battle is on, and who ya’ gonna call?

Well, unfortunately for you, at that point you’re not going to be in a position to call anyone, being deceased and all.

But my guess is your heirs – if they have an aversion to stepping into that cage – will start letting their fingers do the walking, and likely are going to end up talking to someone like … me.

Sorry about that.

As they used to say on the Fram oil filter TV commercials, “Pay me now or pay me later.”

Take some advice from Harry – put your names in your books right now

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Billy Crystal’s character in “When Harry Met Sally” was a lawyer, but he wasn’t as famous for dishing out sage legal advice as he was as the author of The Original Harry Burns Rule (Unamended): “No man can be friends with a woman he finds attractive. The sex part always gets in the way.”

But there is a scene when Harry and Sally’s friends Jess and Marie are moving in together and the just-divorced Harry offers up some pretty insightful counsel:

“Right now, everything is great, everyone is happy, everyone is in love, and that’s wonderful. But you gotta know that sooner or later, you’re going to be screaming at each other about who’s going to get this dish – this $8 dish will cost you a thousand dollars in phone calls to the legal firm of That’s Mine, This Is Yours.

“Jess, Marie, do me a favor, for your own good. Put your name in your books right now, before they get mixed up and you don’t know whose is whose. Because someday, believe it or not, you’ll go 15 rounds over who’s going to get this coffee table – this stupid, wagon-wheel, Roy Rogers, garage-sale coffee table.”

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OK – so Marie made it QUITE clear that possession of the wagon-wheel coffee table was not going to be an issue if she and Jess ever broke up. The point is, Harry’s legal advice to his cohabitating cohorts was pretty sound and would apply in a lot of jurisdictions, including Washington.

Washington law does not recognize so-called “common law" marriages. But Washington courts have established a doctrine that applies community property rules to couples in stable, long-term relationships. And application of those rules could come as a rude surprise at an inopportune moment – like when one of the cohabitating partners dies.

A basic presumption of Washington community property law is that property acquired during marriage is community property. The Washington Supreme Court, first in Marriage of Lindsey (1984) and later in Connell v. Francisco (1995), has applied that presumption to cohabitating couples whose relationship the courts have determined to be “marital-like.” And this rule extends even to assets that – on the surface – appear to be separate property.

What does "marital-like" (or “meretricious”) look like? The Supreme Court has listed five “relevant factors:”

·                     continuous cohabitation;

·                     duration of the relationship;

·                     purpose of the relationship;

·                     pooling of resources and services for joint projects; and

·                     the intent of the parties.

(Don’t phrases like “pooling of resources and services for joint projects” just get you in the mood for date night at … Ikea?)

If one or more of those factors describes your current relationship, you may need to rethink the household financial arrangements.

For instance, you may be maintaining separate “his and her” bank accounts and keeping vehicles and other titled assets in separate names. As long as those were acquired before you updated your Facebook status to “In a Relationship,” you can probably safely assume if you slip out the back, Jack, and make a new plan, Stan, you don’t need to discuss much; you can leave with those assets – even the wagon-wheel coffee table.

But anything acquired after you started sharing housekeys and fighting over the remote control could fall under the Connell rule.

And this applies to enhancement in value of a theoretically separate asset. If Jack is handy and builds a deck that increases the value of Jill’s house, that’s a community asset – even if Jill never put Jack on the title.

This has implications not only for non-amicable “divorce-like” breakups but when one of the partners dies. Legal heirs of the decedent could end up battling the survivor over who’s entitled to bank accounts and other assets.

If division of property in a long-term but non-marital relationship comes before the courts, it will evaluate each party’s interest in any property acquired during the relationship and – just as in a marriage dissolution – make a “just and equitable distribution of such property.”

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Which is how that $8 dish can end up costing $1,000.

What’s the solution? Many attorneys urge unmarried couples they advise to execute a domestic partnership agreement, akin to a married couple’s prenuptial agreement, to, in the words of Seattle attorney Elaine DuCharme, “clarify the ownership of real and personal property, waive or affirm meretricious property rights, and provide for the disposition of their separate and jointly acquired property upon the dissolution of their relationship, or in the event of the death of a partner.”

It doesn’t sound very romantic.

But it may head off that 15-round battle over the wagon-wheel coffee table.

And even if you don’t think a formal written agreement is necessary, do Harry – and me – a favor, for your own good: put your name in your books right now.

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Avoiding probate (!) -- apparently in the '60s, it was one sexy topic

In the mid-1960s, a book called “How to Avoid Probate!” (exclamation and all) hit the national bestseller list, and it stayed there seemingly forever. At one point, it took over the No. 1 spot from another Sixties phenomenon, Masters and Johnson's “Human Sexual Response,” prompting author “Probate!” Norman Dacey to remark, “I don't claim, of course, that I made probate more interesting than sex – it was just that millions of American families had had painful contact with the probate system at one time or another.”

Probate is the system set up in each state to administer decedents’ estates; the court has jurisdiction to determine if a will is valid, decide on the validity of creditors’ claims and resolve disputes among heirs – seemingly not very sexy topics.

Nevertheless, Dacey became something of a celebrity, a kind of legal Don Quixote tilting at the windmills of the legal establishment. His book provided anecdotal evidence of abuses of the system in many jurisdictions, creating a picture of “clubhouse lawyers and judges” conniving to rob “widows and orphans” of their due.

In some instances, the picture was accurate. One effect of the attention Dacey brought to bear was a push for probate reform that continues until this day. Many states have simplified their statutes and gotten rid of outdated and unnecessary requirements.

Unfortunately, nearly five decades after “How to Avoid Probate!” first hit bookstores, many people still don't have a clear idea of what it is they're avoiding.

For instance, many mistakenly equate probate with the estate tax system and incorrectly assume if they “avoid probate,” their estates automatically pass free of estate taxes.

Many clients who come in to my office for estate planning tell me they think they need to set up a revocable living trust to avoid probate.

“Why is that?” I ask them.

They don’t really know – they just know probate is bad.

After we analyze their situation, we often arrive at the conclusion that a basic will and durable power of attorney will address their concerns just fine, thank you – even if it means their estate will go through probate.

There are – believe it or not – some advantages to probate.

The probate process was, after all, created to settle estates, to bring some legal closure, particularly with regard to creditors' claims. If a personal representative (or executor) publishes notice to creditors, any claims against the estate must be filed with the court within four months of the date of the first publication or they are forever barred by statute. (The same protection is available to a “notice agent,” such as a successor trustee, who publishes non-probate notice to creditors.)

The probate court also can be useful in settling disputes among heirs, providing a beleaguered personal representative with some authoritative backup in dealing with squabbling siblings or other beneficiaries.

Under Washington's relatively simple process, a personal representative settling an uncontested estate with nonintervention powers granted in a will (meaning he or she is not required to get court approval for most actions) can wrap things up in a few months, with most of the estate passing to the beneficiaries – the "widows and orphans" – and not to the "clubhouse lawyers and judges."

But if, after all this, you remain in the minority who are convinced probate ranks up there with boils, locusts and thunder and hailstones among the plagues visited upon mankind, let me suggest some strategies and a caution:

1)      As I wrote about a few weeks back, Washington now provides for “transfer on death” deeds that transfer real property automatically on death without the need for a probate. http://grayexpectations.blogspot.com/2014/12/tod-deed-piece-of-paper-that-could-keep.html.

2)      Beneficiary designations on accounts can help your heirs avoid probate. Setting up accounts as joint tenancies with rights of survivorship or with “transfer on death” provisions will allow them to pass without probate.

The above mentioned probate-avoidance devices would probably help most people avoid visiting the iniquities of probate upon their heirs, yea even unto the third and fourth generations.

If you opt for a revocable living trust to avoid probate, make sure all assets subject to probate are transferred into the trust. This means deeding all your real estate to the trust, and titling financial accounts in the name of the trust, along with vehicles, boats – any substantial assets, especially those registered and titled with the state.

What happens if assets don’t get titled in the trust?

It could mean the plague of probate will be visited upon your heirs after all.

We’ll leave the boils, locusts, thunder and hailstones for another time.

For more basic information on the probate process, the Washington State Bar Association's Web site offers a useful online pamphlet as well as links to other estate topics such as revocable living trusts, wills, etc:

http://wsba.org/com/pamphlets/probate.html

Law lets you provide for pets after death -- trust me on this

From the mailbag: “I don't much care for my children. Can I leave my entire estate to my Miniature Schnauzer, Wolfgang, and my tabby cat, Mitzi?" /s/ Pet Lover.

   Dear Pet Lover: You cannot leave your estate to your pets. Animals are legally incapable of taking title to property. Even if they could, they'd probably sell off your shares of Amazon and invest in Meaty Bonz. (Schnauzers never pay attention to price-to-earnings ratios.)
            The law does allow you, however, to establish a trust to provide for the care of your pets after you die. But you need to address your issues with your children. I recommend counseling.

At least, that's what my fellow advice columnists recommend when they want to sound authoritative and don't want readers to suspect they're just winging it.

Speaking of winging it, you can include birds in your trust for animals, since they are vertebrates. That is one of the requirements contained in the Washington probate code (Chapter 11.118, Revised Code of Washington) authorizing trusts for animals: The beneficiary must be a "non-human animal with a vertebrae." Sorry, jellyfish owners.

Before the statute went into effect a few years back, the administrator of your estate could have found him or herself in a real dogfight, so to speak, trying to enforce testamentary gifts (those made in a will or trust) to animals, which have been disfavored in American case law. According to the American Bar Association Journal,
“The common law courts of England looked favorably on gifts to support specific animals. This approach, however, did not cross the Atlantic. Attempted gifts in favor of specific animals usually failed for a variety of reasons, such as for being in violation of the rule against perpetuities because the measuring life was not human or for being an unenforceable honorary trust because it lacked a human or legal entity as a beneficiary who would have standing to enforce the trust.”

Regarding the “rule against perpetuities” – the bane of law students and bar exam candidates for generations – the less said, the better. The rule, designed to prevent “the dead hand” from controlling a family's wealth for generations on end, is itself essentially dead in Washington. One of its requirements was using an identifiable human life to determine if a trust was valid. That requirement is gone. The Washington Trusts for Animals statute specifically authorizes a trust “for the care of one or more animals” and provides that the trust will terminate “when no animal that is designated as a beneficiary of the trust remains living.” As long as Wolfgang and Mitzi are around to annoy each other and take up space on the couch, the trust will be enforceable.

Moreover, any person designated to care for the animals, any person having custody of the animals, or “any person appointed by a court upon application to it by any person” – opening up the field to just about anyone, has legal standing to enforce the terms of the trust. Again, Schnauzers are excluded from the list.

The trust needs to identify what animals it is intended to benefit. I recently drew up a trust as part of a will that incorporated by reference a separate list of the animals the client then owned, including breed, description and name, and I also included a provision that the trust was to benefit "any house-pets or other animals as defined in RCW 11.118.010 that [the client] may acquire after the execution of this instrument." But any offspring of those animals born after the client's death were specifically excluded, providing a disincentive for any named custodian to begin an aggressive breeding program in order to keep the trust income flowing.

Speaking of aggression, I think Mitzi just sunk her claws into Wolfgang. Some kind of territorial dispute on the couch.

Are you sure you don't want to trade them for a jellyfish?

‘TOD’ deed – piece of paper that could keep ‘the lawyers’ out of your heirs’ lives

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“The first thing we do, let's kill all the lawyers.”

-- Dick the Butcher, Henry the Sixth, Part 2, Act 4, Scene 2

Contrary to what you might have heard, that oft-quoted line by Will Shakespeare is NOT part of the statement of legislative intent preceding the text of Washington’s new "Transfer On Death Deed” act – but the thought may have crossed the lawmakers’ minds. At least, the non-lawyer lawmakers.

The purpose of the legislation – officially known as Second Engrossed Substitute House Bill 1117 (see link below for full text) – is to uncomplicate the settlement of estates where real estate – basically, the family homestead – is the only asset of value. Executing a “transfer on death” deed allows a person to pass real property automatically, without a probate – the court-administered settling of an estate. Bye, bye, lawyers.

Actually, those of us who practice in the area of probate and estates aren’t taking it personally. We often work with clients trying to figure out a “workaround” alternative to doing a full probate of an estate where there is real property with equity, but little or no “working capital” to pay for attorney’s fees and other costs. Attorneys often take on probate cases with the understanding that their fees and upfront costs, such as filing fees, will be paid when the property is sold. But that can take time, especially in a down market.

Enter the Transfer on Death Deed, which operates essentially like the beneficiary designations you may have filled out for your IRA or 401-K accounts, or for life insurance proceeds. Many brokerage and other financial accounts are also set up with “transfer-on-death” provisions that take them out of the probate process. The named beneficiary produces proof of the asset holder’s death, and his or her proof of ID. The asset is transferred without resorting to the courts.

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The Transfer On Death Deed, in form, is like any other deed transferring an interest in real property, with the same formalities required (the most important being acknowledgement  -- or signature – by the grantor and recording with the county auditor). Upon the grantor’s death, the interest in the property vests immediately in the named beneficiary. The transfer of equitable title to the property is automatic, unlike bank accounts or life insurance proceeds, where the physical transfer of the funds is not accomplished until the procedural requirements are met. Unlike a quitclaim deed executed during the property owner’s lifetime (often with a life estate reserved), the Transfer on Death Deed can be undone unilaterally at any time during the grantor’s lifetime (assuming he or she still has to mental capacity to do so).

Helping your heirs avoid having to probate your estate, and knowing you can change the named beneficiaries – or revoke the deed altogether – are the two main selling points for Transfer on Death Deeds as a “will substitute.”

But there are some potential downsides. For one thing, if you carry this whole “I-don’t-want-anything-to-do-with-shyster-lawyers” bit to an extreme, you could end up executing and recording a document with legal errors that could nullify the whole exercise. Failing to provide for what happens if a named beneficiary predeceases you could be one sin of omission that consulting with an estate planning attorney would have helped you avoid. Just sayin’ …

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There is also the issue of novelty. This is a brand new statute, at least in Washington; it became law on June 12, 2014. There is no case law yet to deal with ambiguities or omissions in the statutory language.

We often fear what we don’t know. Third parties – in the form of buyers, lenders and title companies – with no familiarity with the new statute may balk at purchasing, lending or insuring title on the property in the absence of the tried-and-true probate proceeding and the court’s official stamp of approval on the transfer. The sky has not fallen in the 20 other states – plus the District of Columbia – that previously enacted Transfer on Death Deed statutes. But there’s always that bit of trepidation that comes with being out front on anything. What do they say about pioneers? Those are the guys with the arrows in their backs.

But on the whole, the introduction of the Transfer on Death Deed should help streamline the process of passing real estate to heirs in cases where there is no other reason to open up a probate. It should save families money and speed up the settlement of the decedent’s affairs – all good things,

And don’t feel sorry for us probate lawyers.

There are always other practice areas we can move into if business slows down too much.

Say, is that a siren I hear?

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To see the complete text of the new statute, codified as Chapter 75, Title 64, Revisded Code of Washington, go to: http://apps.leg.wa.gov/documents/ billdocs/2013-14/Pdf/Bills/ House%20Passed%20Legislature/ 1117-S.PL.pdf