Discussing estate planning at Christmas

Christmas is traditionally a time for families to get together, and more often than not, a time to take stock of family relationships and any issues that may have surfaced during the year. 2010 may have been a year when a friend or relative passed away, and this can often lead to a discussion about their estate and how their property was distributed.

When you potentially have multiple generations of your family seated at a table, it may be a perfect opportunity to start a conversation about estate planning. For many families it would be impertinent to want to discuss the contents of a person’s Will, but it would usually be a reasonable question to ask which of those people around the table had a Will in place. It would also be appropriate to ask if these documents had been looked at or updated at any time in the last few years.

Furthermore, it would be important to make sure that these documents were available to the Executor. It is essential that these documents are safe, but accessible at the appropriate time.  It is also encumbent upon everybody to let their designated Executors know that they have been named in the Will and chosen to take on this role.

You could also examine other family member’s knowledge of the other documents in a complete Estate Plan, like the Power of Attorney, Living Will and Healthcare Power of Attorney.

If any family members do not have a Will, talk to them about the problems that they will be creating for the loved ones that they leave behind – it is a selfish act to not put a Will in place. You can even explain to them that at LegalWills, they can create a Will at home, at any time, without the assistance of a lawyer, in about 30 minutes.

Or you could go the extra step and buy a gift certificate for LegalWills. Yes, you can actually buy the gift of peace of mind for any family members. If somebody doesn’t have a Will, buy them a Christmas gift that they really need; a Last Will and Testament.

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The importance of choosing the right Executor

We discussed in a previous posting the responsibilities of an Executor, but we didn’t highlight the character traits that you need to look for when you are choosing an Executor for your estate.

This person needs to take on the role of accountant for your estate, which includes filing taxes on your behalf. They then need to gather up the estate and distribute it according to your wishes. The most obvious trait you will be looking for in your Executor is a person with a head for figures, who is organized. Somebody who hasn’t filed their own taxes for a few years and cannot find records of previous year’s taxes is probably not a good choice to take over your affairs.

Your Executor will then have to keep a detailed record of your entire estate, and a record of how it was distributed. Keeping their notes on scraps of paper won’t be enough, they will be accountable to the beneficiaries, and will need to provide receipts on request.

Your Executor may be required to hold some of your estate in a trust fund. This means that the need to be good with money and have a sense of how money should and should not be invested. There are so many examples of how this can go wrong, for example, this trustee who stole money from a young boy’s trust fund. And sometimes the mis-use of a trust-fund can just be an alleged misappropriation rather than an outright theft.

It is important to bear in mind that your Executor will often have access to sums of money through your estate that they wouldn’t see on a day-to-day basis. And as a result, money from your estate can just go missing!

I include these links as three examples in the last two weeks that have hit the mainstream media. They are examples of Executors allegedly mis-using, losing or stealing funds from an estate. What makes these three cases interesting is that the first case was the testator’s partner, the second was their lawyer, the third was the city mayor. On the face of it, these would actually be three very good recommendations for a person to fulfil the role of Executor.

It is a very personal decision, but the most important trait of all is one of trustworthiness. You will be handing your entire wealth to this person – everything you own. And you will be trusting that this person will be able to distribute your estate according to the instructions in the Will, without helping themselves to an unfair fee along the way.

So think very carefully, as you can see from these three examples, things can go wrong very easily, and I would suggest that for every example that hits the media, hundreds go undetected.

Learn from Stieg Larsson…

This week we seem to have hit a theme of learning lessons from the famous. Maybe it is not too surprising, but the wealthy and famous are not immune from making the most naive estate planning mistakes. In my last two posts though, I may have missed possibly the most topical, valuable and mistake-ridden of all estate plans; that of Stieg Larsson.

It is fair to say that up to the point when Mr Larsson died, most of us hadn’t heard of him.

Mistake number 1 – never make assumptions regarding how much you are worth. When he died, Stieg Larsson left three completed, but unpublished manuscripts that he had written purely for his own pleasure. After he died they were published as “The Girl with the Dragon Tattoo”, “The Girl who Played with Fire” and “The Girl who Kicked the Hornets’ Nest”. By early in 2010, these books had sold 27 million copies in 40 countries with a number of movie adaptations of each. The box office takings and DVD sales have been huge. The estate of Stieg Larsson is now reportedly worth over $30M and this figure is growing daily. The day before he died, he would not have imagined in his wildest dreams that his estate would be so valuable, a lesson for everybody.Let us now move on to…

Mistake number 2 – keep your Will current. Mr Larsson wrote his Will in 1977 and hadn’t updated it since. A quick look at his life and career would suggest that his intentions in 1977 would be wildly different from his intentions in 2005 when he died. His Will actually left everything to the Socialist Party, but by the time he died he had a common law partner who he had lived with for 30 years. She was not included in the Will because at the time of writing they’d barely been together more than a year or so.

Mistake number 3 – sign the Will properly. Sadly, although Mr Larsson took the time to prepare his Will back in 1977, he didn’t sign it in the presence of two witnesses, rendering it a useless scrap of paper. In Sweden, as well as Canada, the UK and the US, if the Will is not signed in the presence of two witnesses it is not legally admissible (except in some jurisdictions if it was entirely handwritten, but in practical terms, a Will has to be witnessed. Some jurisdictions actually require 3 witnesses, but most require two).

Mistake number 4 – assuming that your life partner will share in your estate. The general fallout of Mr Larsson’s estate is that he died intestate and so his estate is distributed according to the legal formula for that jurisdiction. In this case, he had no wife; common-law is not a recognised state for estate law in Sweden as well as in Canada, the UK and US. The concept of a common-law marriage whereby co-residence for an extended period gives the same rights as a married couple is a myth i.e. the rights to a share of any property is not guaranteed if a “common law” partner is not included in the Will or the individual dies without a Will. So Mr Larsson’s partner of 30 years is entitled to precisely zero, and the entire estate including all future royalties is shared between his father and brother.

It is absolutely unbelievable to think that a person in Mr Larsson’s position could have gone onto a service like LegalWills, created a Will in 30 minutes, signed it in the presence of his two next door neighbours acting as witnesses, and distributed his estate exactly the way he wanted it to be shared. Of course, for Mr Larsson, the legal battle is still ongoing, the estate is being devoured by lawyers on both sides, and his family and loved ones have been left with a bitter, acrimonious dispute.

Once again, it demonstrates that the most thoughtful act anybody can perform for one’s family and loved ones, is to write a Last Will and Testament.

Lessons from the famous

Last week we discussed the estate of Anna Nicole Smith. We presented the argument that the key issues at the centre of the dispute over her estate would never have occurred if she had used a service like LegalWills instead of going to a lawyer. Typically people think of writing your own Will as a poor substitute to seeking legal advice, but in her case it was the very act of going to a lawyer that created the problems for her. Firstly, her Will included at least one unsuitable clause that her lawyer felt was appropriate; independent experts have claimed that the clause was inserted because an “artless drafter copied it straight out of a legal form book without reading it.” Most importantly, Ms Smith almost certainly did not understand the ramifications of everything in her Will because the dispute is still ongoing.

The second important disadvantage was that she was not able to update her Will after the birth of her second child and before she died; a time span of about 5 months. Consequently, no guardian was named for the care of her daughter which has resulted in a long, bitter custody battle.  Anybody with a young child can surely sympathize as very few people manage to make an appointment with a lawyer within the first 5 months of a child’s life – there’s just too many higher priority issues to deal with. Of course at LegalWills the update could have been made during the child’s morning nap in the comfort of one’s own home.

But Anna Nicole Smith is far from unique. So much so that a new book has now been published “Trial and Heirs, Famous Fortune Fights” which uses real-life celebrity errors of the rich and famous to show families how to avoid the same pitfalls when planning for their heirs. I must admit, I’ve not read the book, but I may put it on my Christmas wish list. I have seen some case studies from the book however and there really are some lessons for everybody in these examples, even though the size of the estates in question are generally larger than ours. Two very important points immediately come to mind;

The first lesson is that many of these celebrities died young, and not necessarily as a result of a full-throttle lifestyle. Heath Ledger was only 28 (prescription medications), Princess Diana was 36 (car accident), Gary Coleman 42 (seizure). Fortunately, these three individuals had a Will in place, but according to the recent Findlaw survey only one in six adults under the age of 35 have a Will. Nobody knows when they are going to die, and there is no advantage in waiting to prepare a Will. So even if you are young, it makes sense to prepare a Will.

The second important lesson is that many of these case studies involved a Will that was not kept up-to-date to reflect changes in personal situations. This is the issue with the estates of Michael Crichton, Heath Ledger, and Anna Nicole Smith who all had children who were not included in the Will because they were born after the Will was written. We wrote previously about the most important situations that require an update to a Will, but these case studies show that not only is it dangerous to procrastinate when thinking about creating a Will, it can be equally dangerous to delay making any updates when required.

This suggests that the process needs to be easier to not only create, but also update one’s Will. That is why at LegalWills we allow unlimited updates to the document, and allow people to login at any time, from anywhere in the World, to prepare a new Will.

BC judge doesn’t like the look of a Will …!!

Very occasionally the law changes, or a judgement is made, that causes us to take another look at the services offered by LegalWills and review the structure of our Wills, or more likely the associated help text. Yesterday was such a day.

In a surprising legal ruling, a British Columbia judge overturned a man’s Last Will and Testament because, quite frankly, the judge didn’t think it seemed very fair. Officially, the judge ruled that this man’s daughters have a “valid moral claim to share in the family wealth.”

Our help text at LegalWills currently provides the following guidance for the distribution of possessions, and in essence, these directions apply to the US, Canada and the UK services;

Am I free to leave my property however I wish?

Historically there was a concept of ‘testamentary freedom’. That is, the freedom to distribute your property however you wished. This has long since been abolished, and you are now legally mandated to leave some of your estate to your spouse, any dependants (who have a recognized relationship to you) and pay off outstanding debts….

These obligations have to this point been the extent of the law; there is no requirement by law to provide for adult children who have long since left home and established their own standing in society. British Columbia is alone in being the only jurisdiction in which a non-dependent adult child can challenge his or her deceased parent’s will. Even so, this judge’s ruling has opened up a real can of worms.

The judge felt that the testator was unfair to his daughters, but this could be for a variety of reasons. We may not agree with the man’s misogynistic attitude, but should this give anybody the right to change his Will?

It is our view at LegalWills that a Last Will and Testament is a voice from the grave. It is the only tool available to people to distributed their accumulated wealth according to their wishes. These wishes are shaped based on a life of experiences, some good, some bad. But it seems wrong for somebody else to bring their sense of fairness into the distribution plan of an estate.

If I like one of my adult children more than the other, I should have the right to leave more of my estate to one child than the other. This is because my predilection is based on my life’s experiences and my sense of their worthiness. It could be completely wrong in somebody else’s opinion, but it’s my estate and just as I can share my wealth different while I’m alive, I should be able to do the same in my Last Will and Testament.

So, for our LegalWills help text we are going to add a small caveat for our customers in British Columbia; a judge may not like the way you’ve chosen to distribute your estate and so there’s always a chance that your wishes will not be fulfilled.

And I thought a lawyer was supposed to make things better!

Every day it seems that a lawyer will write something online warning against trying to prepare one’s own Will, and very often the arguments are supported by some questionable anecdotes that describe how a person messed up their Will when they tried to prepare it without legal advice. We published a post in September ridiculing the example of the person who apparently inadvertently left their entire estate to “insert name here” because they didn’t realize this was simply a placeholder. We suspect that this was an apocryphal tale designed to scare people into paying hundreds or thousands of dollars for unnecessary legal advice.

Yesterday I read the following post which warned people against creating their own Will with a number of examples of how easy it was to make a mistake. This paragraph though particularly piqued my interest.

DIY kits rarely take into account the complexities of divorce, remarriage or having children from a previous marriage.  Without proper guidance, a mistake in this area could cause a number of problems, including a spouse losing out financially to a child from a previous marriage (as was the case with Ana Nicole Smith) or the disinheritance of children.

That certainly is a scary thought; the idea that by preparing your own Will you could make the same mistake as Anna Nicole Smith with all the legal wranglings and paternity tests that have been bleeding her estate dry since she died. But hang on….Anna Nicole Smith prepared her own Will? I thought she was surrounded by lawyers! Her estate was worth millions of dollars; and with the complexity of her family situation she would certainly be the type of customer that LegalWills would advise against creating her own Will.

A little research discovered that her Will was a complete mess. It included a bizarre clause that leaves everything to her living child but intentionally disinherited all future children. This is a clause usually reserved for philandering men who try to protect their estate from future claims of hitherto unknown children.

A wonderful blog article by Robert E Bauman, a respected JD (Doctor of Law) commented;

“having read some of the provisions of the will, I’m wondering if it was written in the dark by the law school’s pet mascot….So why did Anna Nicole’s will have such an “after born” disinheritance clause? It seems her artless drafter copied it straight out of a legal form book without reading it.”

The “artless drafter” in question was one Eric James Lund, registered attorney of Los Angeles.

So far from discrediting the process of preparing one’s own Will, this particular example highlights some of the inherent risks of going to a lawyer. Two significant issues come to mind;

You are more likely to place all of your faith in the skills of a legal professional assuming that they know what they are doing, and less likely to step through the clauses in the Will and question their relevance to your situation. We discussed this precise issue in a previous post.

Secondly, you are less likely to update your Will to reflect changes in your personal or financial situation. With a service like the one at LegalWills the client can simply login, make a change, create a new Will and be done. It seems that unfortunately in the 5 months after giving birth to her daughter, Anna Nicole Smith was unable to organize a trip to Mr Lund’s offices to update her Will. This is a very common scenario.

So there are definitely situations where legal advice is a good idea; we’ve made that observation in many previous posts. But this example does nothing to discredit the act of preparing one’s own Will.

And, by the way, the Wills at LegalWills would never include a clause like the one creating problems for Ms Smith’s family.