Cautionary Tales - The Cost of a Cheap Estate Plan - Episode 217

Hey there, Legal Tea Listeners –This is your host, Jenny Rozelle! Today’s episode of Legal Tea is the “cautionary tales” topic. And on these “cautionary tales” episodes of Legal Tea, we normally talk about real-life cases with real-life clients that are things me or my office have worked on -or they are things that I think are generally good things to be aware of, that way you don’t turn into a cautionary tale on my Legal Tea podcast one day! So… for today’s episode, we’re going to be talking about a married couple that came into my office, who already had an estate plan – specifically a Revocable Living Trust – but they wanted to come into the office to see “if everything was still up-to-date and okay.” What really prompted them to pull out their estate planning binder was that … the wife had a medical event that resulted in them having a significant physical and cognitive challenges. Suddenly, all those legal documents weren't just paperwork sitting in a drawer – they became incredibly important, incredibly fast.

(And let me just say – this is exactly WHY we always tell people to get their estate planning done while they are healthy and thinking clearly. You don't want to be scrambling to figure this stuff out during a crisis.)

Anyway, my colleague met with this couple, and afterwards, she came to me pretty concerned. She said, "I don't even know where to start with this. Their Trust document has so many problems, and I feel terrible because they obviously paid good money for something that's just... not good. But I don't know how to tell them they basically need to start over." After she walked me through what she had found, it became clear that we needed to have a conversation with the clients about whether to do a Trust Amendment or a complete Trust Restatement. Since this might be useful for folks listening, let me explain the difference real quick.

When you need to make changes to your Trust, you have two main options. An Amendment is like adding a page to a book – your original Trust document stays exactly as it is, and you create a separate document that makes the changes. A Restatement, on the other hand, is like rewriting the entire book. It completely replaces your original Trust document with a brand new one. Now, which option makes sense depends on what kinds of changes you need to make. If it's just small tweaks, an Amendment might work fine and it'll usually cost less. But if you are making major changes – or if there are bigger issues with the original document – a Restatement is often the way to go, even though it typically costs more because there is more work and more drafting involved.

Now, in this couple's case, one of the big changes we needed to make was removing the wife as Trustee because of her incapacity, but the boilerplate document had very confusing language on “how” to remove the wife as Trustee, so they were a bit of a pickle. Now, technically, we could fix things by doing an Amendment, but in this situation, we did not recommend it. Here's why: the language in the trust was so confusing that if we had to show that language to a bank or financial institution, they would probably make things difficult (honestly, rightfully so – given the confusing language), so having to show them an Amendment to say “Oh! We updated that section” was not really ideal. Rather, getting that language totally our of our hair via a Restatement would make things significantly better and easier. Even though it cost more, my colleague and I agreed that a Restatement was definitely the better choice here.

But here's where the story gets even more wild and interesting. A few days later, my colleague came back to me with some news that just floored me. She said, "You're not going to believe what I discovered. I looked up the attorney who originally created their Trust, and he's been SUSPENDED from practicing law." I was like, "Wait, what?!" Turns out, this attorney had gotten into some serious trouble with the Indiana Supreme Court for the way he was handling estate planning cases. And get this – he was working with an insurance company in a way that basically violated a whole bunch of our legal ethics rules. The Court found that he was not properly serving his clients, and ultimately suspended him from practicing law.

When we shared this information with our clients, they were absolutely ready to move forward with the Restatement. They wanted that suspended attorney's work completely out of their lives. And honestly, I don't blame them one bit.

So let me tell you what this attorney was doing that got him in trouble, because I think it is important for everyone to understand what to watch out for. This insurance company had set up what they called an "estate planning service" that promised to help people avoid probate. But here's the thing – the insurance company is not allowed to practice law. So they had this attorney working behind the scenes to actually create the legal documents.

The problem was HOW they were doing it. The attorney never met with clients in person – everything was done over the phone. And instead of actually counseling people about their options and what would work best for their situation, the attorney basically just created whatever the insurance company told him to create. Then, instead of the attorney meeting with clients to go over the documents and make sure they understood everything, the insurance company's sales representatives would handle getting the documents signed. Oh, and the attorney was getting paid by the insurance company, not by the clients themselves. Weird, weird, weird.

This went on for almost ten years before it caught up with him. When the disciplinary case was filed, the Court found that this attorney had violated multiple Professional Rules of Conduct. Let me run through the list:

First, he failed to properly consult with clients about how to achieve their goals. Second, he accepted payment from someone other than his actual clients. Third, improperly shared legal fees with non-lawyers. Fourth, he let the insurance company direct his professional judgment instead of providing independent legal advice. Fifth, he assisted in the unauthorized practice of law. And sixth, he improperly accepted referrals from what was essentially a lawyer referral service that was not following the ethics rules. … That's a lot of violations, huh! And this attorney did not have any prior disciplinary issues – this was his first time getting in trouble with the ethics board.

Now, why am I bringing this up? More and more states are cracking down on these arrangements because they are trying to protect YOU, as the consumer, that may not know how to find the right professionals to work with … or how to triage a situation and make sure you are getting taken care of properly. Because when attorneys start cutting corners on ethics rules, or when non-attorneys start doing legal work they're not qualified to do, it is absolutely the clients who suffer.

Now, with this story, I am not going to name names – not the insurance company, nor the attorney (who I believe remains suspended – as in, he’s not practicing law anymore) – even though part of me wants to call them out. But the truth is, there are companies and individuals doing this exact same thing right now. There are non-attorneys out there doing quasi-legal work, and there are attorneys working "behind the scenes" just like this suspended attorney did. And unfortunately, they often have a lot of clients because they can offer cheaper prices than attorneys who are doing things the RIGHT way. And do you want to know why they are cheaper? To me, it is pretty simple. Either they are not actually attorneys, or the attorneys are not the ones you are actually working with directly.

Those of us who are licensed attorneys practicing the right way have significant expenses that drive up our costs. We have to carry malpractice insurance. (You know – insurance in case the attorney messes up, which again – protects YOU) … We pay dues to multiple bar associations – local, state, and national. (To make sure we are staying “in the know” with local events impacting our fields.) We pay licensing and renewal fees to the state. (That help to monitor these kinds of things.) We're required to complete continuing education courses every year, and let me tell you, those courses are expensive. (To make sure we are constantly improving ourselves which provides better and more quality service to clients.) We have to pay for access to legal research platforms so we can stay current on cases and rules. And don't even get me started on the cost of law school – which non-attorneys obviously don't have to deal with.

As we start to wrap things up, I want to kind of give some good take homes – you know, sometimes these questionable operations can seem really appealing because they are offering estate planning services at prices that seem too good to be true. And look, I get it – legal fees can be expensive, and everyone wants to save money where they can. But when it comes to your estate plan, cheap can end up being incredibly costly in the long run. Think about what happened to that couple who came into our office. They thought they had a solid Trust, but when they actually needed it to work, they discovered it was not all it was cracked up to be. Now they are having to pay to have everything redone properly, on top of dealing with the wife’s medical event.

That's not saving money – that's throwing good money after bad. Your estate plan is not like buying a generic brand of cereal where "close enough" is fine. This is the document that's going to control what happens to everything you have worked for, and more importantly, it is what is going to take care of your family when you cannot. That deserves an attorney who is actually looking out for you, who is following all the ethics rules, and who is going to create something that will actually work when your family needs it most.

Alrighty, let’s shift to a sneak peak of next week, which we’re circling back to the “current trends” topic where we talk about things that are going on currently that impact my estate and elder law world – or maybe, things that I have stumbled upon on the news or social media that is relevant to this podcast. Next week, we are going to talk about how to handle bitcoin / cryptocurrency when it comes to your estate plan – and the issues it sometimes causes when it’s time for people to inherit it. So, that’s what next week will be about, Legal Tea Listeners, so until then, be well and talk soon!

Sources:

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