The Trust Protector

Civilian 1: "Is that Vironic?" 
Civilian 2: "No, Vironic had a different suit."
The Trust Protector: "No, I'm a new superhero! I'm the Trust Protector!"

- Disney/Pixar's The Incredibles 
(paraphrased by Ethan J. Huizenga)

Having moved from St. Louis, Missouri, to Orange City, Iowa a year ago, I've kind of been taking for granted the idea that estate planning strategies are uniform from one region to the next. Recently, though, I've discovered that this is not the case. One specific strategy where I notice a difference from there to here is in the use of Trust Protectors.

A Trust Protector is an individual - not the Grantor, Trustee, or Beneficiary - who is empowered by the Grantor to ensure his or her wishes are met. The Grantor picks someone he or she trusts - a family member, friend, or even the Grantor's attorney - and gives them certain powers over the trust and trustee. These powers might include the ability to replace the trustee, the power to amend the trust, or even the power to revoke the trust if it becomes impossible to accomplish the Grantor's goals.

The concept of the Trust Protector is not a new one. It has been used in off-shore trusts for many years, but has only recently begun to be used in domestic trusts. Furthermore, the Trust Protector is most typically used domestically when planning for very large estates. Nationally, the smaller, more typical estates do not generally see the option of using a Trust Protector.

We recommend the use of Trust Protector provisions in many of the trusts we create for clients because it builds in an extra layer of flexibility once the Grantor has passed away. Even in situations where the Grantor is their own trustee, a Trust Protector gives an added layer of protection if the Grantor becomes incapacitated or the after-death beneficiaries are unsatisfied with the performance of the successor trustee.

The Trust Protector was recently highlighted at the Farm Estate and Business Planning Seminar in Ames, Iowa. I was unable to attend that conference, but you can click here for an attendee's blog about the presentation.

Wills, Wishes, and Widows

“To my first wife Sue, whom I always promised to mention in my will, “Hello Sue!”

- Anthony Scott, in his last will and testament

According to Merriam-Webster, a will is “a written instrument, legally executed, by which a person makes disposition of his or her estate to take effect after [his or her] death.” That’s the end of this blog. Check in next week for more exciting information.

Oh. You’re still here? You mean a basic definition wasn’t what you came here for? I see. Well, let’s explore that definition a little more.

“A Written Instrument”

A will must be a written document. This includes handwritten, typewritten, and printed formats. Video wills and audio wills are not valid in the state of Iowa. Yes, this means that episode of Law & Order got the law part wrong. No, you can’t believe everything you see in the movies.

A video will might be allowed if the will is also in writing. You could use a video will to read the text of your written will, allowing your heirs to see you addressing them specifically. This could benefit the estate in several ways: it could provide additional evidence supporting the will in the event someone contests it, discourage the heirs from fighting amongst themselves, and make it easier to interpret the language in the will according to your wishes.

Remember, though: a video will, on its own, is not valid in Iowa. There must be a written instrument.

“Legally Executed”

This is the one that’s easy to miss. Your will must be signed by you and two witnesses in each other’s presence. I can’t stress this one enough. You and the witnesses have to sign while in the same room. Each witness needs to be present for your signature as well as the other witness’s signature, and you must be present for both witnesses’ signatures.

Some states allow what is called a “holographic will.” A holographic will is one that is hand written by the deceased person (testator) and signed. A true holographic will is not signed by witnesses. This is not allowed in Iowa. If you hand-write your will, you still need to have it legally executed with the signatures of two witnesses.

“Disposition of [Your] Estate”

This is the one everybody knows. You make a will to make sure your property goes where you want it to go after you go. Seems pretty simple: want to give money to your kids/friends/charity/pet? Put ‘em in your will.

You can do more than that, though. Your will allows you to decide who is going to manage your estate after you die (the executor). It allows you to appoint a guardian and/or trustee for your minor children and/or their inheritance.  You can specifically disinherit someone in your will. It is, truly, a pretty robust instrument. 

Just for kicks, check out the list of strange and silly wills at Purple Slinky to see some of the crazy things people have tried to do with their wills.

“After [Your] Death”

A will does absolutely nothing until you die. Well, it takes up space in your attorney’s fire safe. But, other than that, nothing. A will has no effect until your death. The people listed in your will don’t have any claim to their expected inheritance. Your executor has no authority. Your kids’ guardian has nothing to guard. In order for any of the terms in your will to take effect, you have to kick the bucket.

This does not mean that you can’t give your estate away before you die. You can give some measure of control over your estate to your heirs through life estates, joint tenancy, and even outright gifting. These types of transactions are tools used in estate planning and can remove items from your estate to help reduce your exposure to the estate tax. But they are not a will.

I mentioned earlier that a will is a robust instrument. While that's true, there are a lot of things that a will cannot do. That's why an estate plan has six essential elements instead of one. Next time, we'll talk about powers of attorney and why you need them. Until then, how about a joke:

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Lawyer Joke of the Week:

Q: Why does California have the most attorneys and New Jersey have the most toxic waste dumps?
A: New Jersey got first pick.

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Starting Our Approach

You cannot live without the lawyers, and certainly you cannot die without them.

- Joseph H. Choate

How does your attorney decide what estate planning documents you need? Many attorneys sit down with you for half an hour, ask you a series of questions, fill out a form, and make your estate plan based on that form. After you leave, they give the form to their legal assistant or law clerk. That individual takes the form, plugs your information into the will template that best suits your situation, and contacts you to set up a will signing.

Estate planning questionnaires are all over the internet.  They contain information ranging from personal identification (name, address, phone number) to chosen heirs and beneficiaries. But there is one noticeable item that is missing from the majority of those forms: your goals for your estate plan. What do you want to accomplish by creating an estate plan?

Most often, people want to avoid paying taxes. However, there are many other reasons to create an estate plan. An estate plan can:

• Name a guardian for your minor children;
• Give direction to any guardians you name or who are appointed;
• Name a custodian for the property inherited by a minor child;
• Provide for unborn beneficiaries;
• Make it incredibly risky to challenge the will's terms;
• Name a specific executor;
• Give instructions in the case of the simultaneous death of your spouse;
• Impose conditions which your heirs must meet before they inherit;
• Provide for the continued operation of a family business;
• Make funeral arrangements; and
• Make post-mortem gifts to charities;

These eleven items are just a scratch on the surface of the options you have in your will. A simple questionnaire couldn't possibly cover or include every single option. That's why we take an organic approach to estate planning.

We use our initial (no charge!) interview and consultation to determine what you want your estate plan to do for you and for your heirs. By having a conversation with you about your goals, we can better determine which of the six essential elements will most efficiently accomplish those goals. We have found that this more organic approach to estate planning allows us to more effectively accomplish our clients' objectives. Increased effectiveness means happier clients!

Now, if you will please make sure your seatbelts are on and your tray-tables are in the upright and locked position, we are preparing to land.

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Lawyer Joke of the Week:

Q: Have you heard about the lawyers’ word processor?
A: No matter what font you select, everything comes out in fine print.

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The Six Elements of an Estate Plan

A lawyer is a learned gentleman who rescues your estate from your enemies and keeps it to himself.

- Henry Bougham

If you google “essential estate planning documents,” you will find about 976,000 websites, many of which have three items on their list. These items are:

1.  a will
2. a general (financial) power of attorney
3. a health care power of attorney/living will

Depending on your source, a living will and a health care power of attorney might each get their own line item, or you might have a trust in the list you find, increasing the total to four. This list reflects the traditional use of estate planning going back decades: protect the client’s estate from the government when they die. However, while these documents are in fact essential, they do not account for other, more personal concerns.

Every individual affects the lives of the people around them. Each person has a worldview, a personal code of ethics, by which they live their lives. We believe that it is important to share that worldview with the people we care about most. Our clients’ financial legacies are important, but we believe their personal legacies are just as important.

With that in mind, we have put together a new list of the six essential elements of an estate plan

1. a will
2. a trust
3. a general (financial) power of attorney
4. a health care power of attorney
5. a living will
6. a legacy statement

Over the next several weeks, we will discuss each of these items in a little more detail. We hope to educate you regarding your estate planning options, but we also hope to show you how our approach to estate planning encompasses every aspect of your legacy, not just the financial part.

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Lawyer Joke of the Week:
Q: What's the problem with lawyer jokes?
A: Lawyers don't think they're funny, and no one else thinks they're jokes.

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Why Flat Fees?

“Most good lawyers can work eight or nine hours a day and bill twelve.” 

– The Firm, John Grisham

My father-in-law loves to poke fun of my chosen profession. One of his favorite jokes involves asking how much of my time is getting billed to a client as we play golf, watch a baseball game, or grill burgers in his backyard. He’s a funny guy. Really.

But his teasing raises a valid concern that most people have when they are faced with hiring a lawyer. In an article on her blog, Lawyer Meltdown, Allison Shields notes that “one of the main complaints from clients about hourly billing is that they are unable to budget or to anticipate legal fees.” Other, potentially more serious, problems with hourly billing are:

• it encourages inefficiency
• it provides lawyers with incentive to overcharge
•  it causes frustration for clients who are concerned about the clock ticking for every task the lawyer performs regardless of how meaningful it is
• it discourages clients from spending time talking to their lawyers

All of these issues with “the billable hour” are the reasons I avoid using hourly billing whenever possible.

A flat-fee system for providing legal services can provide the lawyer with more freedom to think outside the box when providing solutions to his clients. It also encourages open communication between the lawyer and his client. It is vitally important to me that my clients feel free to contact me with any questions or concerns they have without having to worry about what a single phone call might cost them. Setting a flat fee for each representation allows that.

In addition, setting a flat fee at the outset of the representation allows the lawyer to engage in more detailed research or writing without worrying about whether the client will balk at the additional expense on his monthly billing statement. The client benefits greatly from this because the lawyer is freed from the concerns about hours and can focus solely on what approach or methods will most benefit the client.
David H. Dunsmuir boils the flat fee system down this way: “In the end, the approach requires little more than the client and lawyer defining a scope of work to be accomplished, and agreeing on the value that will be paid for that work.” The client’s goals become the sole focus of the representation.

I look at it this way: when my client and I sit down to discuss how to best meet their goals, we form a sort of partnership with those goals as the driving force. This approach aligns my objectives with theirs, so we can work together to achieve the best result possible for the client.

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As a part of the weekly blogging I hope to do, I thought it might be fun to include a 'Lawyer Joke of the Week' segment:

Lawyer Joke of the Week:

Q: What’s the difference between a lawyer and a herd of buffalo?
A: The lawyer charges more.

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