The number of elderly people as a percentage of the population is increasing. So are the numbers of attorneys to consider estate planning as part of their practice. The following fact pattern is a relatively common hypothetical situation that estate planning attorneys deal with. Please note that transfer (estate, gift, and generation-skipping) tax issues are beyond the scope of this article. Thus, this article deals with what some consider “simple” estate planning issues. The point of the article is that you get what you pay for and hiring an attorney solely because he/she is likable can result in problems for you and your family later on (any resemblance with any actual attorney is a coincidence).
Attorney Jack Smith is just beginning his estate planning practice, but his clients would never know that from reading his cool website. Jack graduated from a local law school in 2015 and has a cool website with a lot of “likes” from his friends in the area. Seeing Jack’s cool website, a new estate planning client sets up an appointment. John and Judy Jones walk in accompanied by Judy’s son, Barney. John is 82, Judy is 72, and they have now been married for five years. Jack discovers that John has two children from a prior marriage, Fred and Betty. Judy has two children from a prior marriage, Wilma and Barney. John and Judy do not have a prenuptial agreement, and John wants to give his home to his son Fred, who is disabled. John currently has a revocable trust and the only asset in this trust is John’s home, which he transferred to the trust before he married Betty. John’s trust states that the home should be sold on John’s death and that the proceeds should be given to Fred “as needed.”
John wants to leave $750,000.00 to Betty, because of her help over the years. John would like to leave the rest of his assets to Judy, but after talking to Barney, he is starting to reconsider.
John has heart problems and is starting to become forgetful. Judy is in good health. John has $1,500,000.00 of assets consisting of John’s home (in the trust) worth $500,000.00, a stock and bond account worth $500,000.00, and an IRA worth $500,000.00. Judy has a checking account with $10,000.00 and an IRA worth $50,000.00. Neither John nor Judy have long-term care insurance.
The meeting was set up by Barney. John has taken a liking to Barney after Barney built a deck on John’s home last year. John wants to make some changes to his trust and “avoid probate.” John wants Barney to become successor trustee of John’s trust. Judy would like to talk to attorney Jack privately.
It has taken attorney Jack Smith approximately twenty minutes to gather this information, and Jack is starting to think that he need to talk to his friend, Mr. Expert, Esq., a Florida Bar Board Certified Expert in Wills, Trusts and Estates. Jack Smith leaves the room, calls Mr. Expert, conveys the fact pattern to him, and asks for his help. Mr. Expert tells Jack that he needs to consider the following issues:
- Who is the client? Is Jack representing more than one party? Is there a potential conflict of interest? If there is a conflict has it been explained to the clients? See Fla. Bar R. 4-1.7.
- Is Jack stumbling into an attorney-client relationship with individuals you do not want to represent by giving them advice on which they rely? See Togstad v. Vesely, Otto, Miller & Keefe, 291 N.W. 2d 686, 693-94 (Minn. 1980).
- Why is Barney in the room with his mother and John? Why did Barney set the current meeting? Is Jack stumbling into an allegation of undue influence resulting in litigation? See Hack v. Janes, 878 So. 2d 440 (Fla. 5th DCA 2004).
- Does John have the legal capacity to execute estate planning documents? See Marston v. Churchill 137 Fla. 154, 158 (Fla. 1939).
- What type of disability does Fred have? Will transferring assets to Fred disqualify Fred from received need-based benefits? Does Fred need a special needs trust? See generally 42 U.S.C. § 1396(p) and the relevant Social Security Administration’s Program Operations Manual System (POMS) available at https://s044a90.ssa.gov/apps10/poms.nsf/aboutpoms.
- Because there is no prenuptial agreement, under Aronson v. Aronson 81 So. 3d 515, 519 (Fla. 3d DCA 2012), at the moment of John’s death his homestead property will pass outside of probate “in the twinkle of an eye” to his wife for life, and then to his surviving children, Fred and Betty.
- Even if Judy waives her right to the homestead pursuant to Fla. Stat. §732.702(1), forcing a sale of John’s homestead will destroy his creditor protection and make an exempt asset non-exempt and available to John’s creditors on his death. See Knadle v. Estate of Knadle, 686 So. 2d 631, 632 (Fla. 1st DCA 1996).
- If Judy survives John, she has a right to thirty (30%) percent of the “elective estate” pursuant to Part II of Chapter 732 of the Florida Probate Code, in addition to her rights to homestead, exempt property, and allowances as provided in Part IV of Chapter 732. See Fla. Stat. § 732.2105.
- If Judy is willing to waive her spousal rights pursuant to a post-nuptial agreement, she needs separate counsel. Jack needs to make sure that he is not conflicted out of the entire case pursuant to Fla. Bar R. 4-1.18 (Duties to a Prospective Client). As a result, meeting in private with Judy is probably not a good idea.
Jack interrupts Mr. Expert. “I am getting a headache. These people are in the next room, and I don’t think I will remember half of what you just said.” “But wait,” says Mr. Expert, “I am really just getting started, and there are so many more things I need to discuss with you concerning this case.” “Mr. Expert, I am going to give them your card. Can you take this case?” “I don’t have a conflict with John,” Mr. Expert tells you. “You can have John call me.” “Thanks Mr. Expert,” Jack replies gratefully. “How do you know so much, and where can I learn more?” “It takes years of practice and actively seeking additional knowledge through self study,” Mr. Expert replies.
In this example Jack is a an attorney with integrity. He recognized he needed assistance and for the benefit of his client he referred the client to qualified counsel. However, every single year I see estate plans that are a mess because an attorney drafted the documents without realizing the hidden problems. Florida Bar Wills, Trusts and Estates Board Certified Experts have been evaluated for professionalism, and tested for expertise so the public knows how to select a qualified attorney! For more information contact Matthew A. Linde today at 239.939.7100.