Most of my blog posts have been directed at the general public. It would be good if more people had a general consciousness of what trust and estate administrators do.
But today, I’d like to talk to the attorneys:
Please, please…in the name of all that is holy and held dear to whatever-lawyers-have-instead of hearts: PLEASE, stop titling documents “the Jim Smith Living Inter Vivos Revocable Trust.”
You are indeed writing an estate plan that is created by the Grantor while alive. I get it.
The Client can change the document at any time, while they are alive. Trying to let them know that. OK.
But remember—the first time many (or any) of the Client’s family will actually USE, let alone READ any of your brilliant legal handy-work, will be when the Client’s Successor Trustee goes to open or close a checking account in the name of the Trust. That’s right—a bank account for a fiduciary agent of a dead person, with irrevocable terms, which the drafting attorney irrevocably named “the Jim Smith Living Inter Vivos Revocable Trust.” By the way, we’re opening the account because Jim Smith died. The bank manager is likely to have hair turn grey in front of the customer during the next hour. Mass chaos shall ensue, or at least a tempest in a bottle.
Some foul demon from the mists of time made the English phrases “a revocable trust” and “irrevocable trust” sound identical. That and the phrase “the corpus of the trust estate” are the bane of the uninitiated financial planner or trust officer. Estate planning is the art of setting as few land mines as possible while being paid to keep the playground safe.
The Uniform Trust Code is applicable in many States. It has been the law of the land in Virginia since 2006. This scintillating piece of modern legislation overturned about 400 years of legal tradition, and reversed the basic assumption that if a trust did not explicitly declare itself revocable, it was irrevocable. The blessing of having started my career in 2005 is that the rule for me has always been that a trust is “[rē’vōkəb(ə)l]” unless it states otherwise—also, if someone is dead, or otherwise gives up all control, then the trust is “[əˈrevəkəb(ə)l].”
Estate planners are constantly in the act or re-working our spiel. In the 1990s, you needed an Inter Vivos Trust so that you could avoid the heady cost of probate, and an Irrevocable Life Insurance Trust to pay estate tax so you wouldn’t need to sell the family home. The name of the game was “get everything out of the estate.” Then, as now, the majority of folks didn’t really understand what they were signing, but they trusted their lawyers. I would guess that thousands, if not millions, of Revocable Living Trusts drafted between 1990 and 2010 were either: (1) funded posthumously, or (2) not funded at all.
As the estate tax exemption crept, and ultimately rocketed, past the most opulent dreams of the American bourgeois, interest rates and stock markets also stopped playing by the rules of the Clinton era. For the upper-middle class, the name of the game is now, “get everything back into the estate before Pee-Paw dies to avoid income taxes.” For the poor and the lower middle-class, probate has become a regulated process whereby the considerable debt that fuels the American lifestyle could be apportioned and written-off. Probate magistrates, such as Maryland’s Registers of Wills, have begun requiring a review copy of the Trust for purpose of local inheritance tax collection. Some of Virginia’s Commissioners of Accounts also require review copies. “Don’t worry, they are mailed back to the lawyer.” (You didn’t start worrying just then, did you?)
Billionaires are still playing the game from the 90s. Bully for those who have already put together a practice for the top 0.01% of the country, you lucky so-and-sos.
For the rest of us, we began to take CLE on elder law and financial planning. Or we started considering polishing up our headshot for the next audition. 20 years of rules, forms, formulas, charts, as well as tried, true, and trite sayings—all went in the trash in 2008, and another decade’s worth of detritus was jettisoned from our practices again in 2017. Some practices are sitting on 30 years of out-dated forms, only half-aware of where the proverbial bodies will be buried when the literal bodies are. Banks have spent the run-up to the “Great Wealth Transfer” by cutting or eliminating community trust departments, shifting to the “Wealth Management” model and leaving those who still must deal with the paperwork of death (despite having less than $5 million) with fewer options. The world will never be short of estate administration problems, but it may be running short of those willing to fix them.
A secret motto of all the legal profession is “sweat the small stuff, definitely sweat the small stuff.” Lawyers expect perfection of themselves, and often therefore cannot understand why that is not the general bar by which humanity is judged.
Here’s something small you can actually let go.
It’s “Trust,” just “Trust.”