More lessons from the famous

Yesterday in New York, the Last Will and Testament of reclusive copper heiress Huguette M. Clark was filed. She was 104 years old when she died and in my opinion, the contents of the Will just don’t feel right. The Will was signed and witnessed in 2005, when Ms Clark was 98 years old, and at this point her attorney cut of all lines of communication between Ms Clark and her relatives. So, what is so uncomfortable about the contents of the Will?

Firstly, Ms Clark’s family were completely cut out of her $400M fortune. That in itself may not be cause for concern, but when a 98-year-old does this, it raises a few red flags.

It is however the distribution of the money that is the real cause for concern; $33M to her nurse, $500,000 to her attorney, $500,000 to her accountant and $100,000 to her physician (who presumably will be the person to testify that she was of sound mind when the Will was written). The accountant and attorney are also named as the Executors of the estate which would allow them to claim an additional percentage (amounting to several millions of dollars) to distribute the funds according to the instructions in the Will.

Of course in New York, as in most jurisdictions there are ethics rules that prohibit a lawyer from drawing up a Will for a client and including themselves as a beneficiary. Specifically, the professional conduct rules state;

A lawyer shall not:
(1) solicit any gift from a client, including a testamentary gift, for the benefit of the lawyer or a person related to the lawyer; or
(2) prepare on behalf of a client an instrument giving the lawyer or a person related to the lawyer any gift, unless the lawyer or other recipient of the gift is related to the client and a reasonable lawyer would conclude that the transaction is fair and reasonable.

It is interesting to note that nearly all articles covering this matter make reference to both the lawyer and accountant being under criminal investigation and the accountant having a felony conviction against him. What isn’t clear is whether the bequest to the lawyer drafting the Will could potentially invalidate the entire document or just that single bequest. Only a long drawn-out court case is likely to resolve this matter. One thing is known – there will be a challenge to this Will.

So, what are the lessons here for the rest of us;

  • Write your Will when you are young enough to know what you are doing. The most common reasons for challenging a Will are undue influence and mental capacity i.e. not knowing the implications of what you are doing. Wills written by 98 year olds that suddenly disinherit family members to the benefit of a professional care-team will almost certainly be challenged.
  • Challenges are expensive and will whittle away the value of the estate so think carefully before you choose to disinherit family members who may feel that they have a claim on your estate.
  • Do not include professional advisors as beneficiaries in the Will. It undermines their credibility and opens the Will up to questions of coercion.
  • Choose your Executor wisely. Your estate will probably have more value than most people deal with on a daily basis and it makes people behave out of character. If a person suddenly has a million pounds or dollars to take care of, they must have true integrity and honesty to carry out the instructions in the Will. In the case of Ms Clark, appointing convicted felons and people under criminal investigation are probably not the best choices.

It is very sad to see bitter fighting over a $400M estate; greed makes people behave in strange ways. But even if your wealth is modest by comparison, it is still worth taking sensible precautions to ensure that the people who you really care about, benefit from your bequests.

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The sworn Affidavit of Execution

One of our most frequently asked questions for LegalWills is “am I required to have my document signed by a lawyer or notary to make it legal?”. We’ve addressed this in previous blog entries and explained that a document is made legal by signing it in the presence of two witnesses who cannot be beneficiaries within the Will. There is no requirement in any jurisdiction that we cover, to have a lawyer or notary sign a Will to make it legal. But I think it’s worth expanding a little on the “Affidavit of Execution” that sometimes accompanies a Will.

An “Affidavit of Execution” is a legal document that can be appended to a Will that attests that the signing procedure was correctly followed. The document itself is very simple; it simply states that the person signing the Affidavit was a witness to the signing of the other document (in this case the Will) and that they and any other witnesses were all present in a room together during the signing. It is usually a couple of paragraphs long. But, the Affidavit must be signed under oath, which means that it must be signed in the presence of a person with “notarizing authority”. They will usually say to the witness something along the lines of “do you swear under oath (or “in the presence of God”) that you witnessed the signing” and the witness should reply “I swear” and then sign the affidavit in the presence of the other witness and the notary. The witness must also swear that they know the person who signed the original document (the Will). It’s all a little Medieval, but the Affidavit then becomes legally binding. This is because as we know, you have to tell the truth if you say something under oath! (note that the Will was already legally binding before the Affidavit signing process).

You may wonder who the “oath takers” are; Public Notaries, Commissioners of Oaths etc. Well, it’s all a matter of applying. For example, in Ontario, you can pay $110 and apply to the Attorney General to become a commissioner for taking Affidavits (lawyers in good standing automatically have the power to take oaths) . You have to be 18 years of age and have a job that requires it – there are no courses or training. In other jurisdictions however, things are a little different. In New York for example you have to sit the New York notary public examination (the process is similar in California). British Columbia appears to be at the other end of the spectrum; the BC notaries website describes a program of 2 years in duration with an outlay of $20,000 for tuition fees, books etc. – the application alone costs $900. But it seems that their bailiwick is greater in BC with Notaries legally allowed to prepare Wills which presumably includes giving legal advice – something that they cannot do in Ontario (I would be very happy for anybody to provide clarification on this in the comments!).

The confusing application process and inconsistent powers of Notaries aside; what does the Affidavit of Execution actually do? It all comes down to the probate process; if after you die there is some doubt over how the document was signed; particularly if there is a challenge to the Will, then the probate court will ask the witnesses to the signing to testify under oath; that the signing process was followed correctly, that you were not under external influences, you knew what you were doing and that you understood the contents of your Will. By signing an Affidavit at the time the Will is signed, this procedure is preempted as the swearing under oath is done at the time of writing rather than the time of probating the Will. That is why in some US states they call this a “self-proving” Will (but just to make things more complicated some US States e.g. California, regard any Will as self-proving as soon as it is signed – the whole Affidavit overlay is considered redundant and can actually invalidate a Will).

Whether or not you decide to sign an Affidavit with your Will is a personal decision. At LegalWills we try to explain what it is, but we cannot give legal advice and so leave the decision up to the person creating the Will. In Canada companies like Red Seal Notary provide cost-effective affidavit signing services. Whatever you do, don’t pay a legal forms site to download an Affidavit for $10. Anybody who takes an oath can provide the form, and at LegalWills.ca we have them available free of charge.

I’m not sure that this post provides any clarification; it seems more confusing to me now than it did when I started writing!

What to look for in an online Will provider

So, you have decided that you have a simple family situation and that paying for professional legal advice may be overkill for your needs. You understand that it’s important to have a Will, and you feel comfortable using an online service to create it. However, there seem to be a few of them around, so how do you choose the best service for your needs? I’d like to provide a few pointers.

First of all you need to look at the company itself; how long has it been around? has it established any credibility? is it accredited by agencies like the Better Business Bureau? do the testimonials on the site seem genuine?

Then look at the initial interaction with the site; does it ask for your email address before you can do anything? this may be a red flag.

But the most important element to an online service is that it is truly interactive and that it allows you to create a legally binding Will that is not likely to be challenged once you have passed away. We have cautioned many times against the use of blank forms because there is no guidance in these kits. You may think that you’ve created a legal Will but it may be completely unenforceable in your jurisdiction. You need to be very wary of services that look interactive, but in reality they just complete a form based on your information with absolutely no intelligence.

I stepped through an online service this morning and the end product was this;

The unenforceable Will

The service now states at the top that I am “just a few moments away from completing your Will” all I have to do now is pay. But here’s the scary thing; I told the service that I am married with a young child, but the service has allowed me to inadvertently disinherit my entire family. I haven’t set up a trust for any minor children, in fact, I haven’t even named a guardian. There was no help along the way to tell me what I can and cannot do and once I pass away this “Will”is an utterly worthless piece of paper because it is entirely unenforceable. This online service has offered me no more than the blank form Will kits that we despise.

What you should be looking for in an online service is one that guides you through the process and offers you online help explaining what you can and cannot do. This service for example asked “are you married yes/no” without explaining the nuanced situation of separation in Canada. Many people will make a critical mistake on the very first question!

Ideally you need a service that will ask you to enter information like the age of your children and then prompt you to create a trust. You also should look for a service that will warn you if you are about to do something that will lead to a legal challenge or make your Will unenforceable.

Warning message at LegalWills

You also need to look for a service that supports what you want to actually do; for example, naming joint Executors, or setting up a trust for your child that allows funds to be distributed at different ages, for example, a third at 21, a third at 23 and the rest at 30.

Try to find a service that allows you to make changes or updates if you realise afterwards that you have forgotten something. You should be able to do this for an extended period of time without penalty (at LegalWills we give you a year).

Also look for service providers that offer live support over the phone or by email, and only use a service that offers a full money back guarantee if you don’t like the look of your final document.

At LegalWills we worry about the standard of many online service providers, but all we can do is provide some suggestions for how you may be able to tell the difference between a good service and a poor one.

Where have all the estate planning lawyers gone?

There was an interesting article published last week in Forbes magazine entitled “Where Have All the Estate Planning Lawyers Gone?“. The premise of the article is that with inheritance tax thresholds increasing in most jurisdictions, many people feel that they would be paying for professional advice that would make little financial difference to their situation. In the US, the tax exempt part of an estate has increase almost every year for the last ten years and it now sits at $5 Million. This means that your estate will only be subject to Estate taxes on every dollar above the $5 million threshold which for many people, means that their estate will be passed on tax-free. According to the author, who is both an estate planning lawyer and an accountant

“High-end estate planning reminds me of my favorite nursery tale, Hans Christian Andersen’s The Emperor’s New Clothes: what matters is not whether the client is getting value, but whether he thinks he is getting value. Demand for estate planning has actually been declining for years.  People are reluctant to pay fees for work that does not currently benefit them.  They don’t see estate planning as a productive use of their funds.”

According to the article it seems that many people are questioning the value of professional estate planning advice. In the past the rationale was always that a fee of say, $1000, would easily be recovered by the estate by astute tax avoidance strategies. But with the exemption threshold now being raised to a level that makes it a non-issue for most families, many people are turning to preparing their own estate planning documents.

But it seems that the trend is Worldwide. A new survey coming out of the UK states that “Britons are shunning financial advisers and turning to the internet for advice on estate planning, according to research by Standard Life.” A whopping 48% of people are using the internet to figure out their estate planning needs rather than booking an appointment with a financial planner or solicitor. This is a massive and irreversible trend and the independent survey points out that

“Solicitors are still out in front with 54 per cent of the public turning to them for estate planning but this figure has significantly dropped in the past year, down from 74 per cent the year before.”

We’ve explained the reasons for this many times in our blog; the cost, the convenience, the privacy, the ability to keep documents updated. But it seems that Forbes have hit on an interesting nuance; it’s not just cost, it’s the perceived value for money.

Obviously, there are many situations that call for the advice of a legal professional, but many people are coming to realize that they can produce the exact same documents at a tenth the cost.