Two Attorneys: Would You Choose Right the First Time?

 

          This analysis refers to the case Murphy v. Housel & Housel, summarized in our blog titled “ESTATE ATTORNEY MALPRACTICE–CASE SUMMARY (MURPHY V. HOUSEL).” To best appreciate the following analysis, read this previous blog summarizing the case.  (Hover over the title with your cursor and click.)

            The two lessons to be learned from this case are straightforward:

                    1. Estate planning law is complex and

                    2. Choose your attorney carefully.

            Estate Planning Law is Complex.  There is a misperception among some lawyers that estate planning law is easy.  This is particularly true for new law school graduates or general practitioners.  Even some experienced lawyers may have a perception that estate law is for those lawyers who could not make it in international corporate law or complex business litigation or corporate mergers and acquisitions. I remember many years ago watching the television series “Boston Law.”  In one episode, the slick and sophisticated corporate lawyers mocked their estate planning colleague with the statements that he “just does wills”—the clear message being that estate planning was far beneath the heights of corporate legal complexities.

            Experienced estate planning attorneys (particularly those who work orchestrating complex estate tax laws, or work transferring a variety of corporate or other assets to beneficiaries, or work litigating an inheritance conflict)—these experienced estate attorneys shrug off such criticisms.  We know our area of law is as complex as any area of law. And we are confident we could be competent international corporate lawyers—it’s just that those areas of law seem so boring!

            The complexities of estate planning law are not limited to high-value estates or perceptions among lawyers themselves.  The real problem is the perception among common folks that their middle-class assets (a home, retirement account, life insurance policy) are easily transferred using an online LegalZoom will, or easily probated with an Office Depot probate document kit.  It may be impossible for these folks to really believe that they will save much more money than they will ever pay by hiring a competent estate planning attorney.  Even “simple” estates can be surprisingly complex.

            Choose Your Attorney Carefully.  In the Housel case, compare attorney Housel with attorney Diane Walsh.  What more need be said?   The contrast is clear: a poor attorney and a competent attorney.

            In my experience, poor attorneys are often not so much incompetent or unintelligent as they are incapable of standing up to clients, insisting on doing quality work, and demanding to be paid for that quality work.  That is, poor attorneys are often embarrassed to look a client in the eye and say, “This is potentially complex work and will require 40 to 50 hours of my time to get started. That will be $12,000 to $15,000, initially.  If you can’t pay that, I am not your guy.”

            I think incompetent attorneys are attorneys who are unwilling to walk away from a cheap-skate client. The cheap-skate client gets the cheap, incompetent attorney, and they both proceed to hate each other.  They each got exactly what they wanted.

            Clearly, Diane Walsh was a straight shooter—a competent attorney.  Was she expensive?  I am certain she was.  But do you want an expensive straight shooter or a cheap document-mill attorney?  You are not going to have your cake and eat it too.

           See our summary of this case in the blog titled “ESTATE ATTORNEY MALPRACTICE–CASE SUMMARY (MURPHY V. HOUSEL).

          See Murphy v. Housel & Housel, 955 P.2d 880 (Wyoming 1988).

By Craig E. Hughes

 

 

Seventy Percent of Estate Plans Fail

 

            Seventy percent (70%) of estate plans fail.  This is the conclusion of an extensive study conducted by Roy Williams and Vic Preisser, and described in their book, Preparing Heirs, Five Steps to a Successful Transition of Family Wealth and Values (San Francisco, Robert D. Reed Publishers, 2003).

            The Williams and Preisser study involved 3,250 estate plans. A failed estate plan was one in which planned asset transfers from benefactors to beneficiaries did not result in the full value of the assets (valued at the date of the benefactors’ deaths) ultimately being transferred to the beneficiaries. The value of all bequests to beneficiaries was less than the value ascribed to all assets at the benefactor’s deaths.  I am assuming their study took into account basic administration costs and economic factors.

            Williams and Preisser argue in their book that the primary reason why estate plans fail is a lack of effective communication between benefactors and their family beneficiaries. In my experience estate plans fail for several other reasons summarized in the introductory video found on this website.

            In my decades of experience in estate planning, Williams and Preisser’s seventy percent failure figure is more than believable.  For numerous reasons, at least 70% of estate plans fail to live up to what they promise to do.  The value of all bequests to beneficiaries is often significantly less than the value of all the benefactor’s assets at the benefactor’s death, after taking into account administrative costs and economic factors. The reasons most estate plans fail in this way include reliance on cheap online documents and document-mill attorneys (poor documents); lack of communication between benefactors and beneficiaries (Williams and Preisser); mistakes and misunderstandings of the law on the part of inexperienced executors; outright fraud; and disputes and litigation.

Craig E. Hughes

 

Life is Complex and So is Estate Planning – Case Summary (Ashworth v. Bullock)

 

Siblings Joseph Bates and Rosemary Bates Harris owned–as joint tenants–a piece of property and a house on that property. The Bullocks named in the case lived in the house pursuant to a rental agreement with Joseph Bates.

In 1976, Joseph Bates and the Bullocks entered into a written agreement whereby the Bullocks would pay $84,000 or $200.00 a month until the year 2013 to purchase the home. The Bullocks did not know that Joseph’s sister Rosemary held an interest in the property as a joint tenant.

Rosemary Harris died about seven months after the agreement was signed between the Bullocks and her brother Joseph Bates. The Bullocks stayed on the property and made their payments for over 30 years. They also contributed to the property taxes and made significant improvements to the property.

Joseph Bates died in 2010, and his personal representative, Sam Ashworth, assumed that the property and home were part of Joseph’s estate. Ashworth asked a property manager to contact the Bullocks to obtain a written rental agreement. The Bullocks refused, claiming they were purchasing the house, not renting.

Ashworth argued that the agreement between Joseph Bates and the Bullocks was not valid because the other joint tenant who owned the property–Rosemary Bates Harris–had not signed the agreement to sell the house.

The trial court and appellate court ruled in favor of the Bullocks. First, the courts found that at the date the agreement was signed, the sales agreement was in fact an invalid contract under Utah law (statute of frauds), because the other joint tenant had not signed the sales agreement. Second, the courts found that when Rosemary died, her full interest in the property transferred to the other surviving joint tenant, her brother Joseph Bates. Third, the courts found that once Joseph Bates had full ownership rights in the property, the sales agreement ripened into a fully enforceable contract.

As Judge McHugh of the Appellate Court wrote:

“Nothing occurred between Bates’s execution of the Writing and his acquisition of fee title in the property to prevent it from ripening into a contract. By the terms of the Writing and the parties’ practices, Bates was not expected to convey title to the property until 2013, when the Bullocks would have paid in full. Before he was required to transfer title, Harris’s interest passed to Bates, thereby giving him sole ownership of the Property. Although the contract was unenforceable when originally signed, Bates’s acquisition of full title revived it because Harris’s signature was no longer necessary to satisfy the statute of frauds and the Writing had not been repudiated,” McHugh wrote.

The Court stated that Joseph Bates formally agreed to sell the property, and the Bullocks had faithfully fulfilled the terms of the sales agreement for 30 years. Joseph Bates fully owned the property when it counted: at the final payment made by the Bullocks. Any ruling against the Bates would perpetrate fraud, not prevent it, the Court concluded.

Ashworth v. Bullock, 304 P.3d 74 (Utah App. 2013)

By Alicia Knight Cunningham

See our blog analyzing this case: “Smart Planners–Don’t Waste Dollars Saving Pennies.”

Trustee Fees and the Terrestrial Kingdom of God

 

            This brief analysis refers to the case Smith v Kirkland (2017).  This case is summarized in a previous blog titled: “TRUSTEES: CHOOSE WISELY–CASE SUMMARY (SMITH V. KIRKLAND).”  To best appreciate the following analysis, read this previous blog.  (Hover over the title with your cursor and click.)

            The Kirkland case is a perfect example of a Trust that was drafted with almost incredible blindness to a host of perfectly foreseeable surprises. While the full ironies in the case are only best appreciated by a person steeped in the culture of fringe Utah religious groups, the straightforward legal issues presented in the case are still a lesson for everyone interested in creating an estate plan that actually works.

            Initially, it should be noted that paying a professional trustee $50 per hour to administer a trust is not unreasonable at all; such a rate is not in left-field; in fact, such a fee is on the lower end of the spectrum.  Professional trustees–especially trustees who are also attorneys or CPAs–charge five to six times this amount in performing the complex accounting, administrative, and legal work of managing a trust.

            Professional trustees who are not attorneys or CPAs may charge $50 to $100 per hour in the end, but when legal or accounting issues arise in administering a trust—and such issues arise constantly—the professional trustee must retain the attorney or CPA at their higher rates to address those issues.

            The point is that professional trustees—and related attorneys and CPAs—are charging an average of five or six times $50 per hour.

            Further, diligent and honest professional trustees are worth every dollar they ask. Professionals can do in one hour what it takes a non-professional family trustee ten hours to do.  Professionals do not make costly mistakes.  Professionals account to beneficiaries.  Professionals minimize and contain conflicts.

            Now, with all this in mind, if Mr. Kirkland still insisted on naming amateur trustees to manage his “Kingdom of God Trust,” he should have at least indicated in his trust a clear hourly rate his trustees would be paid (say $25 per hour, to increase each year by say 3%) instead of using the boilerplate and ambiguous phrase “reasonable compensation.”

            But there are much more serious problems with the Kingdom of God Trust than ambiguous compensation terms.  These problems include poor choice of trustees; failure to appreciate the role of good trustees; poor beneficiary notification provisions; poor accounting requirements; and poor amendment provisions.

            Like all other cases summarized in this blog, the conflict in this case could have been avoided altogether if the documents had been drafted by an obsessive, paranoid, competent attorney. But perhaps Mr. Kirkland was just too smart to retain an attorney. And if he did retain an attorney, where was this attorney mentally when he prepared the “Terrestrial Kingdom of God Trust”?

            By Craig E. Hughes

            Click here to see Smith v Kirkland (2017), 2017 UT App 16.

            Click here to see our summary of this case in the blog titled: “TRUSTEES: CHOOSE WISELY–CASE SUMMARY (SMITH V. KIRKLAND).”