Article written by Liz Farr
Tale #1: The Attorney and his Grief-Stricken Widow
“Patrick” was a successful attorney, whose family came from upper crust Chicago and San Francisco society. He and his wife Danielle lived a comfortable and pampered life, and their grown son and his family lived in an equally grand home just two houses down on their exclusive street. A daughter and her family lived in a nearby state.
Patrick had begun the process of creating a trust that would provide for Danielle’s needs. He also wanted to make sure that his children received some of the wealth he had received from his family. But his children feared that Danielle wouldn’t honor those wishes, and that they would end up with nothing.
Unfortunately, Patrick’s health took a dramatic and abrupt turn for the worse, and he found himself in hospice. His cognitive skills were failing, but he wanted to make sure that each of his children received a modest sum from the investments he’d inherited from his parents. So, he summoned another attorney, who helped him draft an updated will and trust documents. With a shaky hand, he signed everything days before he passed away.
Danielle was overcome with grief at his passing and was equally bewildered at the financial decisions she now had to make. She’d always left all of that to Patrick and now suddenly, those fat investment accounts didn’t look so big to her.
With no previous experience handling money, she had no context to judge whether it would be enough. Patrick’s final arrangements included a complex series of bequests and the disclaiming of those bequests.
Filled with grief, Danielle raged at her children, her attorney and the partner working with her accusing accused them all of wanting to see her in the poor house. She adamantly refused to sign anything, disclaim or share her considerable wealth with her children.
At last check, over a decade after his passing, Patrick’s estate was still open and bets in the office were that it wouldn’t likely be settled until Danielle’s death.
Tale #2: The Oil Baroness and the Trust that No One Could Decipher
First we have Julie, daughter of a Texas oil man. Through considerable business acumen, her father created a magnificent oil and gas empire, which spun off royalties in the mid-seven-figures each year. At his passing, Julie and her brother Richard became equal owners in the oil business.
Julie also had a son in his late 20s, who had struggled with mental illness, substance abuse and stints in jail. She had supported him through various attempts at college, vocational training, rehab, self-employment and full-time jobs. Nothing stuck.
At one point, Julie nearly wrote him out of her will, until he and his girlfriend had a son. Now that she was a grandmother, Julie was committed to the welfare of this young child.
However, shortly before the child’s second birthday, Julie’s health took a sudden nosedive. She was in end-stage renal failure, brought on by diabetes. For reasons that were never clear to me, she refused dialysis and she went into hospice care.
Julie summoned the best attorney in her small, rural town to her hospital bed and explained that she wanted to put her oil and gas interests in a trust. She feared that giving her son outright ownership of her business interests would have been a disaster and she wanted to be sure that her grandson was financially taken care of.
Since her son received SSI, her lawyer, who had never written a trust document, recommended a qualified disability trust and a will. At least, that’s what she thought she signed during the last days of her life.
She designated Miriam, her best friend from childhood, as the trustee. Miriam was a struggling professional photographer and had zero experience with financial matters. Oddly, she hired a graphic designer to help her with the accounting of the income and expenses for the trust.
They were both in way over their heads. When Miriam came to our office for assistance in setting up her QuickBooks and to do the tax return, we asked an attorney who specialized in qualified disability trusts to take a look at the trust document and the will.
Besides Julie’s son, several other people were named in the trust document as beneficiaries, but it wasn’t clear exactly what they were to receive. Some people got bequests in the will and were also mentioned in the trust document as being eligible for some kind of financial support.
In addition, it was equally unclear what sort of assistance Julie’s son and his girlfriend were to receive. The instructions in the trust were vague and also conflicted with the instructions Miriam had received at Julie’s deathbed.
Miriam followed her conscience and dispensed odd forms of support to Julie’s son and to some of the people named in the trust. These included car payments and new cars, rent payments, groceries, plane tickets and checks to various people.
Miriam had made multiple trips to Midland, Texas to confer with Julie’s brother Richard, who was now her business partner of sorts in the oil and gas empire. She was also paying herself a generous salary to oversee the trust.
The attorney we consulted called it “a lawsuit waiting to happen.” Even he wasn’t really sure what was supposed to happen with the flood of oil and gas royalty payments that came in every month, but there were way too many problems with it to really call it a qualified disability trust. He recommended going back to court to resolve the issues.
In the meantime, Miriam and her graphic-designer-turned-bookkeeper made a complete muddle of her QuickBooks files. They refused to work with anyone in our office to straighten it out, preferring instead to hire a succession of cut-rate bookkeepers, who each made it worse.
It seemed that each time I looked at her QuickBooks file it was as though someone had taken a giant spoon and scrambled the numbers and accounts. Of course, since we had helped with the initial set up, everything was our fault.
We struggled to get the tax return for the trust done. We kept getting conflicting answers about who had received benefits from the trust and who had received bequests.
It was also hard to figure out how much the son had received and the trust document was no help. Moreover, reconciling the statements from the oil and gas empire with the transactions in QuickBooks was nearly impossible.
Eventually, Miriam fired us and everyone in the office who had dealt with her breathed a sigh of relief. So, what are the lessons for your clients from these two chilling tales?
Article by A.J. Fudge, JD
As estate planning attorneys, we strive to provide our clients with excellent service and a comprehensive estate plan that will protect all of their interests. We conduct extensive interviews to get to know our clients, and take the time to truly understand their needs and the nuances of their particular situation. The good estate planning attorney truly leaves no stone unturned; no loose ends.
It’s gratifying to uncover an issue or identify a solution that our client hasn’t thought of yet, and you see the relief expressed on their face that silently says, “I’m so glad you thought of that.” It is these moments when your client truly begins to appreciate the value that you add for them. When you spot something other attorneys have not, it gives your client a lot of confidence that they made the right choice in working with you.
Planning for Animals
One easy and meaningful way for you to do this is by addressing one of the most commonly overlooked aspects of an estate plan, and one that is essential for many clients: continuing care for their animals. Most estate planning attorneys pay little or no attention to their clients’ animals, and this omission can have heartbreaking consequences for clients. If your client has animals, those animals are a part of the family in some way or another. Sensitive planning for the client’s needs requires that the plan provide for those animals and protect and provide for them in their estate plans.
The first step is to spot the issue, which is easy to do by adding an “Animals” section to your intake worksheet. If you use the Intake Worksheet in Wealth Docx®, it’s easy to add a space under the “children” section to add a space for “pets.” As you gather data, it is important to get the animal’s name, age, breed, and a short description. When you see that a client has listed an animal on their worksheet, be ready to include this in your discussion at the initial meeting.
Once you have had a chance to get to know the client and address their immediate concerns, let them know that you would like to include their animal in their estate plan as well. Most clients have a moment of thankful surprise along the lines of “Oh my gosh! I can’t believe I never thought of that. Thank you!” Your clients will be impressed, and it will show them that you really care. (One valuable side effect: when you build that kind of relationship with your clients you can count on great word-of-mouth and lots of referrals!)
Now that you’ve determined your client has an animal that you need to plan for, the next question is how to effectively plan for it? It’s easy! Planning for a client’s animal is actually very similar to planning for a client’s minor child. However, in most cases children grow up to be independent adults who can take care of themselves. That is not the case with animals, which is why planning is so critical.
Animal Care Trust
The central component of many clients’ estate plans is the revocable living trust, and planning for an animal will generally take the form of incorporating additional provisions for an Animal Care Trust. There are instances when it is appropriate to set up a separate, stand-alone Animal Care Trust, but these situations are not nearly as common.
You should never rely on a Will when planning for a client’s animal. First, animals do not have time for probate, their care needs to continue uninterrupted and without delay. Also, a Will does not protect the animal in the event of your client’s incapacity. Finally, because animals are considered property under the law, any conditions on their transfer via a Will are generally unenforceable. There are some State statutes that attempt to address this issue, but a revocable living trust is still the much more preferable option. If your client has an existing trust, it is very easy to amend the trust to add the Animal Care Trust provisions.
The Animal Care Trust provisions will be tailored to suit your client’s specific needs, but they generally name and describe the client’s animal, and the estate, or a certain portion thereof, is set aside to be used to for its care. A caretaker is appointed who is responsible for the day-to-day care of the animal; however, the trust itself legally owns the animal. The trustee oversees the money and the caretaker, and has the ability to remove and replace the caretaker. The money is available to compensate the caretaker, and when the animal passes away, the remaining money is distributed to the final beneficiaries of the trust. In most cases, planning for your client’s animal will be a very simple and straightforward process.
Identify Appropriate Caretakers
Your client must first decide who is going to take care of their animal in the event something happens to them. The caretaker will be responsible for the day-to-day care of the animal. Although the animal will be legally owned by the trust, for practical purposes, the caretaker will be the animal’s new family. It is important to select a caretaker who loves animals, and has experience taking care of them. Your client should name an initial caretaker and potentially two back-up caretakers to serve consecutively. Do not appoint more than one caretaker at a time because you may be unintentionally setting the stage for conflict over the animal. Your client should also select an organization of last resort, such as reputable rescue or no-kill shelter, to take the animal in the unlikely event that none of the individuals selected as caretaker are willing or able to take on the responsibility of caring for the animal.
Have your client confirm that the person selected as caretaker is up for the job. It should never be a surprise to someone that they have been named as an animal’s caretaker. Your client should discuss their plans with these individuals to confirm that this is something they would be willing and able to do. This also gives your client the opportunity to address any concerns the caretaker might have. It is better to address as many concerns as possible during the planning process and ensure that they do not cause problems in the future.
Your client should discuss their plans with their successor trustees as well. It is important to make sure these individuals understand your client’s desires and are comfortable administering an Animal Care Trust. While the trustee does not necessarily need to be a huge “animal person,” it is important that they at least like animals and are committed to carrying out your client’s wishes. Trustee abuse is always a concern no matter what type of trust we are talking about, but even more so when planning for an animal. Conflict and expensive lawsuits can cause serious interruptions in the animal’s care.
A trust protector can provide a bit of a safety net, creating a mechanism for dealing with an unresponsive or abusive trustee. Without a trust protector, an expensive, time-consuming, trust-exhausting lawsuit will be their only available tool, which leaves the animal’s future, and possibly even life, in jeopardy.
Once the trustees and caretaker are onboard, the client then needs to think about what kind of instructions they want to provide. Trustee instructions address matters such as how and when to apply trust funds, how much to compensate the caretaker, and what type of oversight is needed. Caretaker instructions address the type of care the animal is to receive, and any special information that the caretaker should know. These instructions may be as brief as a few paragraphs, or take the form of a separate Schedule that is incorporated and attached to the trust. The level of complexity and detail depends on your client and their planning objectives.
The amount of money to be set aside in the animal’s trust depends on the type of care your client wants to provide. Remind the client that the money does not have to be used, but will be available to use if the situation calls for it. In a typical situation where you are dealing with a dog or cat, I recommend clients set aside $10,000 per animal. If the animal has extraordinary medical needs or if the client want to provide a uniquely high level of care, then obviously the amount placed in trust should reflect that. Naturally, the more elaborate the care, the more expensive it is. Some clients choose to set aside the entire estate, including their home, so that the animal may continue to live there with the caretaker until the end of the animal’s life. In some cases clients purchase life insurance to provide funds to care for a pet after the client’s death.
These are the primary considerations when planning for an animal, and for the average client, that’s all there is to it. Pet trust provisions usually comprise only a few additional pages to the client’s revocable trust. The strategy is simple and straightforward, but it adds tremendous value to the client’s plan and makes it truly complete.
It is important to remember throughout the planning process that animals are a responsibility requiring love, time, attention, and money. The animal’s lifespan is also important to consider. Some animals have a very long life expectancy. Some species of birds live to be well over 60, and tortoises can live to be well over 100.
Clients with long-lived animals, you’ll need to plan accordingly. You also need to be aware if your client has an exotic or special needs type animal, mainly because not everyone knows how to care for these types of animals. The client must select caretakers that are familiar with the type of care these unusual animals need.
If the client has horses, comprehensive planning is essential. Bear in mind also that not all horses require the same level of care. Recreational riding horses generally don’t require nearly the same level of care and expense that thoroughbreds or competitive show horses require. It is also not unusual to see horses that are a bit of both, depending on what stage of life they are in. Planning for horses adds layers of complexity.
The horse itself costs a lot of money, and feeding and caring for it does as well. If a client has a competitive show horse, those expenses increase exponentially. The client’s plan must include the money necessary to provide the expected level of care for the horse. Because of their intrinsic value, horses are at a higher risk of being sold for money, including to kill-buyers who send them to slaughter. Once the client understands that their horse may just look like dollar signs to some people, their plan can be drafted to protect against this.
Horses are also dangerous animals if for no other reason than their size, making it essential to choose the right caretakers. It is essential that they be experienced horse-people, who love and understand horses. It may also be appropriate to establish a team of professionals that are available to assist the caretaker with the day-to-day responsibilities of caring for the horse. This team would be overseen by the primary caretaker, and might include a trainer, rider, vet, farrier, chiropractor, etc. The idea is to create a plan that allows the horse’s regular care to continue uninterrupted, whatever care that might be.
Horses are also not generally accepted at most animal rescues. Thus, it is imperative for the client to select an organization of last resort where their horse can safely live for the rest of its life. Again, because of the expense, the client should be prepared to make a financial contribution to the organization selected. Too often old horses that have provided years of service find themselves being transported across the border for slaughter. For the client this would be a heartbreaking end, and it can easily be avoided. If the client has a horse, they really need a plan.
As estate planning attorneys, our clients rely on us to make sure everything will be provided for once they are gone. It is an honor to be trusted with the responsibility, and a duty that none of us takes lightly. Most clients would shudder at the thought of something happening to their beloved animals, but they need you to spot the issue for them and make sure they are protected.
We certainly would never design an estate plan that fails to provide for a client’s minor children. Nor would we fail to appoint guardians or include instructions for the children’s care. Many animal owners treat their animals like their children. It is up to us to help them understand their options and plan accordingly.
Whether or not you, yourself, are an animal lover, if you pride yourself on being a thorough and comprehensive estate planning attorney, then take this opportunity to help your clients plan for their animals. Show your clients that you truly care about taking care of them and protecting all of their interests, and you will make them proud to call you their attorney. That’s really what it’s all about, and it’s good for business.
Jeffrey C. Nickerson - Estate Planning Attorney - My Passion is Special Needs Planning!