The funnel to a successful estate plan

It’s an unfortunate reality that very few people end up with a perfectly executed estate plan. In an ideal world we would see every person’s assets being passed to the next generation in a way that represents their wishes, in reality there are a number of key steps to this process and consequently too many points of failure. This post will explore those steps and what we are doing at LegalWills to try and improve the numbers;

1. 65% of people don’t write their Will

This is of course the most significant leak in the funnel. The vast majority of people never create a Will because it is too expensive or inconvenient. As a result, people procrastinate thinking that they can get to it some time next year. Alternatively they wait until there is stability in their life because they think that the writing of a Will is something that they only want to do once in their life. We often hear from people who say “I will be getting married next Summer, should I hold off writing a Will until then?”. On the one hand, it is true that getting married will invalidate the Will in most jurisdictions, but there is never a time that a person should be without a Will. So we recommend that the Will is written today, updated when the person gets married, and updated every time they experience another major life event. Which brings us to the second issue – Funnel

2. Most Wills are not kept up to date

When a person visits a lawyer to prepare their Will, they can pay a significant amount of money and with that, they would expect the document to last quite some time, if not a lifetime. The reality of course is that the document can be out of date by the time the person gets home. There are many high profile examples of Wills not being updated with dire consequences; new children not being included, new partners, Executors who are no longer fit to serve. In fact, most celebrity Will disputes are caused by a Will not being updated to reflect new circumstances. A Will should not only be updated when there are changes in personal circumstances, but also when a life event happens to anybody named in the Will. It may be that the personal guardians for your children have moved across the country, had triplets of their own or for whatever reason are simply no longer the best choice. Many times we hear from people who explain that “I do have a Will but it was written twenty years ago, before we had children”, in which case, although they are one of the 35% with a Will, it is all but useless.

3. Many Wills are never found

The single most common question we receive at LegalWills for non-customers is “my father had a Will, but we don’t know where it is, how can we find it?” and the short answer is, you can’t. It doesn’t matter whether the Will is stored at home, or with a lawyer’s office, if the family and loved ones are not told where the Will is located, they have very little chance of finding it. We also hear from customers who aren’t sure how to revoke an old Will and explain that “I had a Will written 15 years ago with a lawyer, but I was living in a different city then, I’m not even sure that the lawyer is still there, how do I cancel this Will”. In this situation the testator can’t even find their Will, so there is no chance of a family being able to find it. So although this person is technically one of the 35% with a Will, it hasn’t been updated and it has no chance of being found.

4. The Executor has no idea how many assets there are

We are now left with less than 10% of the population; they have written their Will, they updated it regularly to reflect changes in their circumstances, their family and loved ones are able to find the Will when they need it, but now the Executor will have to find the assets. But there is no list of assets kept with the Will; so infrequently used bank accounts, online assets, dormant savings accounts, stock purchases, or even cash under the floorboards will never be found and never make their way to the beneficiaries. It is never a good idea to include a complete list of assets in the Will itself; they change frequently and you wouldn’t want to have to update the document every time a new account is opened, but the Executor needs to know when their job is complete.

At LegalWills.ca, LegalWills.co.uk and USLegalWills.com we have tried to solve these issues. Firstly, we created a service that allows you to write your legal Will for $34.95 or £24.95 from the comfort of your home. We then allow you to update the document by simply logging into your account, making the change, and printing a new document. We then allow you to create messages that can be distributed to key people after you have passed away, and this can include instructions for locating your Will. Finally we have teamed up with My Life Locker™; the Ultimate Life Organizational System. Using this service you are able to maintain a file of your personal assets which can then be accessed by designated keyholders™ only at the appropriate time. This ensures that all of your assets make their way to your beneficiaries.

How to forge a Will

The title of course is tongue-in-cheek, but it seems that from all of the news lately, there has been a sudden spate of estate disputes and legal challenges. Either because a Will has been forged, signed under duress or written by somebody without the capacity to write the Will. These cases demonstrate that the prospect of an inheritance can bring out the worst in people, create rifts in families, and can result in very expensive legal battles that serve nobody other than the lawyers.

It starts with the bizarre trial of Peter/ Tony Chan who was convicted of forging the Will of Nina Wang – once Asia’s richest woman. Trying to forge a $4 Billion Will is a tricky crime to get away with, and it resulted in a 12 year jail sentence. But Mr Chan was not alone. Next was the Will of Harinder Singh Brar, Maharaja of Faridkot, with another $4 Billion estate. This time it was a team of staff members who connived to leave the entire estate to themselves in Trust, but the courts ruled that the Will was made under duress and therefore illegal.

However, it’s actually more likely that a Will would be manipulated or forged for a more modest estate, and this was the topic of a recent article in the Daily Telegraph discussing the rapid increase in legal battles over estates. There are three key reasons for this rise; firstly, the size of the average estate in the UK has risen from £150k to £265k in a decade. In addition, people are starting to depend on an inheritance as part of their own financial plan – consumer debt is rising and many are banking on an inheritance to get themselves out of debt. And finally, society in general has become more litigious over the years.

Contrary to popular opinion, writing a Will through an online service does not make the document any more likely to be challenged. In fact, just recently, a Will drawn up by a solicitor while in the presence of one daughter, was deemed invalid as the testator did not have mental capacity to write the Will. Turns out that the daughter (who happened to be a magistrate) put pressure on her mother to disinherit the other children. Oh, and she had to pay back the £18,000 in gifts she received in the last few months of her frail life. The real tragedy of this story though is that the estate was worth about £200k, and the whole lot disappeared in legal fees. The whole estate went to the lawyers.

There are some lessons to be taken from this troubling stories. Most importantly, write your Will when you are young enough and have the mental capacity to do it. People procrastinate with their Will writing, thinking that they will prepare it when they are older. We hear all the time people saying “fortunately, I don’t need a Will yet?”. Obviously you don’t, you don’t need a Will until you die, but it’s too late to write one then.

This is one of the reasons that online services like those offered by LegalWills.ca, USLegalWills.com and LegalWills.co.uk are becoming increasingly popular. They allow you to prepare your Will in your own time, on your own terms, but also allow you to update your Will throughout your life, as often as you wish. It makes sense to prepare a Will today, and then just update it as circumstances change.

Keeping your Last Will and Testament updated

After an extended break we’re back and we thought we’d pick up on a story that broke over the holiday that highlights the importance of keeping your documents updated.

In a previous blog entry we listed situations and events that should prompt you to take another look at your estate planning documents. Just before Christmas we described the example of Stieg Larsson who hadn’t updated his Will in over 30 years and left an acrimonious family battle as his legacy to his loved ones. In the case of Mr Larsson, 30 years without a Will update is a little negligent, but sometimes it’s just not convenient or practical to update your Will as soon as a life changing event occurs. We previously highlighted the situation with Anna Nicole-Smith who 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. I think any parent can 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.

Over the holidays another high-profile case hit the news, and again it highlighted the importance of updating one’s Will, but with different circumstance. Mark Madoff, the son of the infamous “investor” Bernie Madoff, committed suicide but left a Will that was woefully outdated. Most importantly it had no mention or provision for his 2-year-old son Nicholas, so although trusts were set up for his two other children, there was nothing set up for Nicholas. The Executor of the Will was named as his father, Bernie, who is not legally allowed to fulfil this role as he is serving time in prison. This particular circumstance was not one of the examples given in our list of “reasons to update your Will”, but it serves as an example for two other important lessons.

Selecting the right person as Executor is critical and we explained in the previous blog entry what an Executor has to do, and how to choose your Executor wisely. Obviously, a convicted felon is a poor choice of Executor, but Mr Madoff Jr didn’t know this when he wrote his Will. Notwithstanding the felony, choosing a 72-year-old man was probably not the most appropriate candidate for the position anyway. It is important that your Executor is alive and mentally competent when your Will comes into effect. So usually parents are not the best choice.

It also illustrates how important it is to cover all of the “what if” scenarios. Mark Madoff did this by naming an alternate Executor so at least his outdated wishes could be administered by a family member. But when writing your Will, it is critical that every scenario is considered; there should be alternate Executors, alternate Guardians for children, alternate plans for the distribution of the assets and even secondary alternate plans. One very common scenario is for a person to name their spouse as the main beneficiary, with an alternate plan distributing the entire estate to the children. There really needs to be a second alternate plan in a circumstance like this if the family often all travel together.

So, another lesson from the news. Keep your Will updated all the time, and always have alternate plans. Updating your documents at LegalWills is as simple as logging into your account, making the change, printing the new document and then having it signed in the presence of two witnesses. If you made your Will through a lawyer, make sure that you make regular appointments to review your documents.

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.