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  • Writer's pictureJenny Rozelle, Host of Legal Tea

Cautionary Tales - Legal Advice from a Non-Attorney - Episode 57

Hey there, Legal Tea Listeners –This is your host, Jenny Rozelle! Today’s episode of Legal Tea is a cautionary tale, where we talk about real-life cases with real-life clients with real facts – they’re things me or my office have worked on. For today’s episode, we’re going to be talking about an important topic, and one that I think some professionals would get uncomfortable to talk about. But, I’m a big fan of uncomfortable conversations – not because I like them, but because so often, that’s where you can identify places/ways to grow, do better, and be better.

What’s the topic, you ask? Well, it’s taking legal advice from a non-attorney, which sounds like … well, duh Jenny, that’s a bad idea, but yet it still happens all the time. Though, I’m not talking about taking legal advice from, say, family or friends – heck, people will always do that and even though I say don’t take legal advice from non-attorneys, people still will always turn to family and friends. But instead of talking to family and friends, for this specific episode and topic, I am talking about clients taking legal advice from another professional … like, say, a financial advisor or an accountant. Here me out…

I’ll share a couple of stories (you know, cautionary tales!) that have very recently happened where this has occurred because I think it beautifully shows what I mean. By the way, before I dive in, please please please don’t think I’m harping on other professionals … or don’t think I think lawyers are faultless … I’m simply hoping that having this conversation will promote 1) better communication among ALL professionals, including lawyers to lawyers, and 2) better communication between professionals and their clients. Alrighty, let’s dive in now…

First story, I had a client, let’s name him Bob, come in to see me and after we thoroughly discussed his estate planning goals, his family, and his assets, I presented a few options that I felt were appropriate to bring up. In effort to not bore you with details that aren’t pertinent to this conversation, he ultimately elected to do a Revocable Living Trust. Of the options I presented, if I were him, that’s exactly the option I would have picked.

So, fast forward some time, maybe a week or so, and I hear from the client that he talked to his financial advisor and the advisor “said he didn’t need a Trust.” Unfortunately, I’ve dealt with this pushback so, so, so much that at this point, I am so used to it. And not to harp on the financial advisor (actually to come to their defense a bit), there are definitely attorneys “out there” that will present options to a client that are wildly inappropriate – so I’m certain the advisor was just trying to look out for his client, Bob. I suppose what I would have much preferred is Bob’s financial advisor picking up the phone and saying, “Hey Jenny, can you tell me a little bit about what the general plan is with Bob?” rather than blankly saying to Bob, that he doesn’t need a Trust.

So instead, in Bob’s case, I picked up the phone and called the advisor, which I would have done anyway because my world is so, so closely intertwined with theirs. (Me chatting with a client’s financial advisor is very, very common.) So, we start chatting and it’s cordial, it’s fine – and then I jump in to the Trust conversation. I explain that Bob is trying to accomplish two very specific things that to make them happen through a Will would require probate, so in effort to bypass probate, putting these two specific things in a Trust allows Bob to 1) accomplish his two very-specific things and 2) keep out of the drawn-out, costly probate process.

You want to know what the two very-specific things were? First, his wife was not his kids’ mother and the house he and her lived in was in his name. If he were to pass before her, Bob wanted to give her the authority to continue living in the house, so the kids couldn’t “kick her out” but also, at her passing, he wanted the house/sale proceeds to go to his kids (not her). Second, one of his children was special needs, so receiving an inheritance would negatively impact his disability benefits he was on. Therefore, Bob wanted to have that child receive his share in a special needs trust, so it would NOT hurt the child’s benefits. Can I accomplish both of these through a Will? Sure can. But to make those terms come to life in the Will is going to require probate, which is going to cost Bob way more than the Trust would have ever cost.

Once I explained all of this, the financial advisor was like, “Well, sounds like you sure know what you’re doing!” So bad, I wanted to be like, “Ummm … yeah, I know what the heck I’m doing and I promise, I’m not trying to pull a fast one on Bob!” Though because the financial advisor said this to Bob, Bob got confused, started second-guessing things, and I had to, sort of, re-convince him that the Trust was the best option for him. And it WAS the best option. I think what I find most troubling about this story is that had Bob totally bailed and said, “I’m taking my financial advisor’s advice … I don’t need a Trust.” then three things could have happened:

1. Since his wife was not a beneficiary in his estate plan, she could have 1) sued his estate to recover, what is called, a statutory spousal allowance/spousal share. You basically can’t disinherit your spouse without a Pre-Nup, so she could have kicked up a fuss.

2. The wife could have ended up having to move out of the house she lived in (which is not what Bob wanted).

3. The special needs son would have inherited and lost his Medicaid benefits.

All of that could have happened if Bob took the too-general legal advice of his financial advisor; though, thankfully, we got things straightened out, his advisor on board, and now, Bob has a beautifully-crafted estate plan to prevent all those “bad” things from happening!

Second story time!

This story consists of an older lady that we’re going to name Nancy. So, Nancy and Nancy’s daughter come into my office and Nancy is interested in learning about asset protection planning against long-term care costs/Medicaid. She had modest assets – a couple bank accounts, a house, an investment account, a small retirement account, and a life insurance policy. And long story short, she said “she worked her tail off and wanted everything to go to her kids – not a nursing home.”

You see, when you bring up the topic of asset protection planning, you’re definitely looking at a trust and likely an irrevocable trust. Now, when I say irrevocable trust, people get scared of that word – and it’s not nearly as scary as it sounds. In fact, the individual remains the trustee (the manager of the trust); retains a power of appointment (which means they can still change/amend things); and even retain a significant amount of control. So, I talked to Nancy about this type of Trust – and she was totally on board.

I see her a couple weeks later and her and the daughter start off by saying, “Jenny, boy do we have lots of questions!” I said, “Okay, no problem – I’m used to that!” Well, long story short, their financial advisor totally scared them out of this trust – he said that:

1. Nancy couldn’t be the trustee (which is wrong);

2. It’d have his own tax ID number and be in a higher tax bracket (which again, is wrong); and

3. Nancy can never amend it (which yet again, is also wrong).

Again, I hear these SAME things from different clients (with different advisors) all the time. Yet again, the accountant is giving them inaccurate LEGAL advice – and in doing so, not only confusing our mutual client, but possibly harming the goal Nancy is trying to accomplish. You see, back in the day, irrevocable trusts were much different – they WERE like all the things he mentioned, but that was 20-30 years ago. While I don’t expect the accountant here to keep up with the laws, I also don’t expect them to spew out inaccurate and inappropriate legal advice. (Sorry to be snarky – but to be honest, I don’t question how he chooses to do a tax return …. Soooo….)

Yet again, I had to play clean-up. And guess what? This story ends different – Nancy totally backed out of doing the trust. She backed out doing the trust that 100% would have satisfied the goal she came into my office to accomplish. So now, she’s very, very likely “too old” to obtain long-term care insurance (if she could, it’d probably be super, super expensive!), so if something happens to her and she needs nursing home or home health care, she’s paying privately. She’s paying out of pocket. Period, end of story. Will I be impacted by that? Absolutely not. Will Nancy? Yes. Nancy’s daughter? Well, her inheritance will be less. Will Nancy's financial advisor? Well, his “assets under management” will continue to decrease, so I’ll let them decide if that impacts them. Will the accountant? Probably not.

You know, I certainly don’t mean for this topic to come across in a way of me harping on other professionals. Like I said earlier, I have to come to their defense, especially after sharing these two stories, because my profession is not squeaky clean either. I mean, how many lawyers jokes are out there, right? MOST of the time, they are coming from a place of trying to protect their client. At the end of the day, it’s well-intentioned, but their good intentions have very real and sometimes bad impacts on their client. One of my favorite sayings in the world is “You don’t know what you don’t know.” In that second story, that professional didn’t know irrevocable trusts aren’t that “restrictive” anymore – that they have drastically evolved. Or, that first story, that professional didn’t know what Bob had shared with me on what he was trying to accomplish. They didn’t know … what they didn’t know.

But you know what would have prevented all of the confusion? Just picking up the phone and calling. Thankfully, as I have a decade of experience under my belt now, more and more financial advisors know me and know I’m not over here pulling fast ones. That’s not me – I enjoy putting my head on my pillow at night and knowing I did a good, honest job. Because this type of thig happens SO MUCH, if I am working with a client and I don’t know their financial advisor and/or accountant, I try to get ahead of the conversation. I usually reach out, say that “hey, I met with so-and-so, this is what we talked about, if you have any questions, let me know!” Simply taking the initiative automatically builds rapport and trust with the professional – it sounds silly, but it’s very true. Heck, maybe all of us professionals should do a better job at communication with each other for our clients.

Alrighty … let’s wrap up this episode. Next week, we are back to the current events/current trends topic – where we talk about something I’ve seen or run across, maybe on the news or social media, that I think would be interesting on here. During next week’s episode, we are going to be talking about Jeffrey Epstein’s Estate – and some scrutiny his Estate’s Executors are facing. So yeah, tune in for that next Tuesday, Legal Tea Listeners! Until then, be well and talk soon!



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