Current Trends - The Estate Planning Crisis Nobody's Talking About - Episode 239

Hey there, Legal Tea Listeners – This is your host, Jenny Rozelle. Welcome back for another episode, which is a “current trends” topic where we talk about things going on currently that are relevant and pertinent to my estate and elder law world, and/or maybe things I’ve seen on the news or stumbled across on social media. Well, today we are diving into something that I am noticing is becoming a, I suppose, current trend – but I am going to also call it a growing issue too that very few people are talking about. What I am blabbing about? Well, it’s that more and more people are wanting or needed a professional to serve as various roles within an estate plan – like, Power of Attorney, Executor, and Trustee – basically, people not wanting to put a family member or a friend in these kinds of roles, but rather a professional. Someone that does this kind of thing all the time, someone that is unbiased, and someone that more or less will treat it like a job – rather than a emotional undertaking. So, let’s dive in…

Now, what I want to talk about first is that you MAY be thinking, “So, Jenny are you talking about a bank or trust company serving in these kinds of roles” No, the answer is no. That is not what I am talking about. In fact, I am going to get into this in a second, banks and trust companies are actually quietly contributing to this being an issue. Rather, I am talking about professionals like lawyers, accountants, financial professionals (which a lot of financial professionals cannot serve due to compliance), … that’s what I mean by professionals. Professionals are directly or indirectly affiliated with estate planning. Now before I get in deeper, I want to talk about what I mentioned a second ago – that this episode is NOT about banks and trust companies serving in these roles. And I made a reference that they are actually kind of contributing to this being an issue.

So, let's talk about why banks and trust companies aren't really helping much with a solution– even though on the surface it might seem like, "Oh perfect, they do this all the time, problem solved!" Well, not exactly. Here's the thing – banks and trust companies will absolutely serve in these roles, BUT – and this is a big but – they typically want a direct relationship with you. And what does that mean? It means when the time comes for them to step in as your Trustee or Executor, guess what's happening? All of your assets are getting pulled under their management. Now, some people are totally fine with that arrangement, but a lot of people are not. Maybe you've got a financial advisor you love and trust, maybe you've got investments set up exactly how you want them – and the idea of a bank coming in and saying "cool, we're moving everything over to us now" just doesn't sit right. So that's issue number one.

But here's issue number two, and honestly, this is the one that really leaves people in a pickle. Banks and trust companies often have pretty steep minimums. I'm talking estate values that need to be, you know, in the millions before they'll even consider taking you on. And look, I get it from their perspective – serving as an Executor or Trustee is a high liability position. There's a lot of responsibility, a lot of potential for things to go wrong, and they need it to be "worth it" for them to take on that risk. But here's what that means for everyday people – if your estate is, say, $500,000 or even $1,000,000, which is substantial to some people, right? That probably will not meet the minimum threshold. So you've got all these folks who don't meet the bank's requirements, and they're sitting there going, "Okay, so then who CAN serve for me?!" It is becoming a real problem.

And this brings me to my next point – there are shockingly few professionals out there who are actually willing to serve in these roles. Like, I'm talking very, very few. And simultaneously, the demand is increasing – more and more people are recognizing they need a professional rather than burdening a family member – but the supply of professionals willing to do this work? It is not increasing. If anything, it might even be shrinking. Let me give you a real example from my own area. I am one of less than five professionals in central Indiana (that’s where I am, if you didn’t know!) who will serve in these roles. Less than five! And here's the kicker – I just recently had to start limiting my involvement to only my firm's clients. Why? Because I was getting appointed left and right by other lawyers who would just, you know, willy-nilly put my name down without even asking me first. And it was turning into an absolute cluster.

Now, here's something else that is important to understand about how this works. Most professionals who do serve in these roles – we do not do it, let’s call it, personally. What I mean is, we serve under a separate entity. So of the less than five professionals in my area doing this work, all of us have set up separate business entities specifically for serving in these fiduciary roles. And there are really good reasons for that. Number one, it protects us liability-wise – because again, these are high-stakes positions where a lot can go wrong. But number two, having a separate entity makes the whole arrangement feel more formal and professional in nature. We can carry Errors and Omissions insurance under that entity, we can have proper business structures in place, and it just creates a clearer boundary between our regular professional work and our fiduciary work. It's better for us, and honestly, it's better for the clients too.

So where does this leave us? Well, we've got a growing need and not nearly enough professionals to support that need. People are increasingly recognizing that appointing a family member or friend to these roles can create enormous burdens – emotional, time-consuming, complex burdens. But when they go looking for an alternative, they are finding that banks will not take them unless they've got a fairly hefty estate, and there's only a tiny handful of individual professionals in any given area who are willing and able to step into these roles. It is a gap that is only getting wider, and frankly, I think it is something our industry really needs to address. Because right now, a whole lot of people are being left without good options.

And you know what? Let me tell you what this actually looks like in practice, because I think it'll really drive home why this is such a problem. Let's say you're someone who's trying to do things right – you've meeting with an estate planning attorney and they ask, "Okay, who do you want to name as your Executor? Who's going to be your Trustee? Who should have your Power of Attorney?" And you're looking at your options. Maybe your kids are too young, or they live across the country, or they've got their own overwhelming lives to deal with. Maybe you don't want to put that burden on your spouse who's the same age as you and might be dealing with their own health issues when the time comes. Or maybe – and this is increasingly common – you have seen what happened when your friend's family went through this, and it turned into a complete nightmare of sibling drama and fighting. So you're sitting there thinking, "I want a professional. Someone neutral. Someone who knows what they're doing." And that's when your attorney has to give you the bad news – finding that person is going to be really, really difficult.

Here's another angle to this that I think is worth exploring – why aren't more professionals willing to do this work? I mean, you'd think there'd be a business opportunity here, right? There's clearly demand. But the reality is, this work is demanding and the liability is enormous. When you serve as someone's Executor or Trustee, you are held to what's called a fiduciary standard. That means you have a legal obligation to act in the best interest of the beneficiaries, and if you mess up, you can be personally liable. And it's not just about making the right financial decisions. You're dealing with family dynamics, you're dealing with grief, you're dealing with people who are often at their absolute worst because they're going through loss and stress. So even with E&O insurance, even with a separate entity structure, a lot of professionals look at this and go, "Yeah, no thanks. Not worth it."

And let me paint another picture for you – because I think people don't always realize what serving in these roles actually entails. Let's talk about being an Executor. You might be thinking, "Oh, that's just wrapping up someone's affairs after they pass away, right? How hard can it be?" Well, let me tell you. This isn't a quick little project. This can easily take a year or two or even longer for complex estates. Now imagine you're a lawyer or accountant with a full-time practice, and someone's asking you to take this on. Can you see why people are hesitant?

But here's what really gets me – and this is something I've witnessed firsthand – when people cannot find a professional to serve, they end up making compromises that can really come back to haunt them. I have seen people name their adult children even though they know it is going to create massive conflict between the siblings. I have seen people name friends who have absolutely no idea what they're getting into and are going to be completely overwhelmed. And then what happens? When the time comes and that role needs to be filled, everyone is scrambling, and it’s not easy, not pretty, and not fun.

Let's also talk about the geographic component of this issue, because that matters too. I'm in a mid-sized market, just outside Indianapolis, and we've got less than five professionals doing this work. But what if you're in a rural area? What if you're in a small town where there might not be any professionals willing to serve? I've had colleagues reach out to me from other parts of the state asking if I'd be willing to serve for their clients, and I've had to say no – I just can’t and shouldn’t take on clients who are three hours away. So now you've got people who not only can't find a local professional, but they can't even find a professional in their broader region who's willing to help. The geographic limitations just compound the problem.

So what's the solution here? Honestly, I wish I had a perfect answer for you, but I think the first step is just talking about this issue – which is exactly what I am doing right now. Because the more people understand that this gap exists, the more pressure there will be to find solutions. Maybe that means more professionals will step up and get the proper training and insurance to do this work. Maybe it means we will see new types of companies emerge that fill this middle ground between banks and individual professionals. Maybe it means our industry needs to rethink how we structure these roles altogether. What I do know is this – if you're sitting there listening to this and thinking, "Wow, this is exactly the problem I'm facing," you're not alone. And my advice? Start the conversation now. Talk to your estate planning attorney about your concerns. Ask them if they know professionals who serve in these roles. And… if you are a professional listening to this and you've ever thought about offering these services – we need you. We really, really need you. Because right now, there are families out there who are doing everything right, planning ahead, trying to protect their loved ones, and they're hitting this wall. And that's not okay. So let's keep this conversation going and figure out how we can do better!

Alrighty, let’s wrap this episode up, shall we? Next week, we’re back to the “celebrity estate planning” type of episode – and actually, the next 2-3 weeks may be on the SAME family. I had a request for me to dive into the famous Vanderbilt family and what happened estate-wise with them to ultimately cause their wealth to go … poof gone! So, I told the individuals who requested this topic that I don’t think I could do it in just one 15 minute episode … so it may end up being a, let’s call it, celebrity estate planning SERIES. So yeah, that’s next week, so until then, Legal Tea Listeners, be well and talk soon!

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