What if Your Estate Planning Lawyer Got it Wrong?
We all want to trust our professional advisors. We hope our financial advisors have carefully considered our circumstances and invested our money in ways that best serve us. We expect our doctors to pay full attention and listen closely when we explain our concerns. Similarly, when we pay thousands of dollars for our estate planning, we want to believe that our attorney got it right and that we can check this box and feel secure.
But what if the plan isn't right from the start or wasn’t properly completed? Does This Happen?
This Happens: Not getting it right. Has this happened to you? Have you ever “not gotten it right?” This happens with lawyers, accountants, doctors, insurance agents, electricians, car mechanics, and (well) with everybody. The common thread with all of these people is that they are human. We are human. Humans make mistakes. It’s human. #mistakeshappen.
I belong to a business networking group called First Class Networking. I have known my fellow members in this group for between 10-35 years and they are all amazing professionals (in law, finance, insurance, real estate, etc.) who I trust to do wonderful work for myself, my family members, and my clients. In one of the meetings, I opened up the topic of how often we see that professionals representing our clients have done something flat-out wrong or incomplete that has really hurt our clients’ interests. Literally, everyone at the table had multiple stories about messes that their clients unwittingly paid someone to put them in.
The real estate attorney talked about an instance where an estate planning attorney made a mistake that delayed the sale of a house and could have ended that deal. In that case, the estate planning attorney (when putting together wills), either forgot or just did not ask his clients (who were husband and wife) how they held the title to their home. When the last of the two died (the wife), the children went to sell the family home reasonably believing that their mom owned the house outright when she passed and that they were free to sell it. They were wrong! You see if the husband and wife had taken title to the home as “tenants by the entirety” or “joint tenants with rights of survivorship” when their dad passed the full title to the home would have instantly moved to the wife without the need for any legal proceeding including probate. But, in this case, the title was held in their names as “tenants in common” which meant that when dad passed early ½ of the house went into his probate estate and not to his wife. To my real estate attorney friend, this meant that she did not have a clear title to sell that house and that a probate attorney needed to go to court, reopen the husband’s estate, and now (years later) get permission to sell the home. This mistake costs thousands of dollars in additional legal fees, and this kind of mistake could unravel real estate deals. All the estate planning attorneys needed to do (when putting their clients’ estate plans together) was to check the deed and, if necessary, either correct the deed or refer the matter to a trusted real estate attorney to do this simple task.
I’ll mention one more common mistake that I see in estate planning a lot! First, let me preface that estate plans fall into two general categories. Some plans are will-based in their plans that are trust-based. The plans that are well-based have as their central document the final Will and Testament. In a trust-based estate plan, the central document is a Revocable Trust. The Revocable Trust is a vehicle that avoids probate, can be used for advanced estate tax strategies, and provides for increased privacy. Trust-based estate plans are more costly than will-based plans (by magnitudes of 2 or 3 times), and they work great when they are finalized properly. You see, a Revocable Trust only works if you transfer all of your assets (your home, your cars, your money, your investments, etc.) into that trust to make the trust work and avoid having to probate those assets.
My financial advisor friends, and I, have seen numerous times where I Revocable Trust-based plan was put together (costing a client between $5,000 and $8,000) but was never funded with assets. When the client passed, the trust had nothing to administer and the client had now (for all intents and purposes) died without a Will and certainly without a plan. And, this is not the kind of thing that any of us can fix when we are dead. This is bad, and I believe that it happens all the time.
How This Happens: Mistakes can happen when a lawyer is too busy, has too much work, doesn’t know what they are doing, delegates the work to office staff who should not be doing the work, or because the lawyer just is not good at following up with the client until the job is done completely and correctly.
Your lawyer is no different than your general contractor. Don’t think otherwise. If we put people on a pedestal, they will have to look down on us. When I lawyer for a client, I consider the relationship a collaboration in which I bring my expertise and the products that I deliver. I am nothing less and nothing more.
I spent decades serving as outside General Counsel for small and emerging companies (with between $0 to $20M in sales) and in those experiences, I learned that as businesses grow quality decreases if the growth occurs too quickly. In other words, sometimes factories, or law firms, get too busy to give the proper attention to things. And, as I said earlier, we are all human.
Why We Believe: None of us want to consider that our trusted professional (who we may have only met for one transaction) may have gotten it wrong for several reasons. Here are just a few:
1. If our lawyer was wrong it’s a poor reflection on me because I hired this person. That’s embarrassing.
2. I have “sunk cost” bias. I paid a lot of money for this plan. It just has to be right. Right?
3. I have “confirmational bias.” I am just going to believe that the plan is perfect and right, and any facts to the contrary just will not register with me intellectually.
4. Having someone else look at my plan will be a hassle. Even if the review is free, it may cost me money in the long-run.
5. I am just too busy to think about this, so I will not think about this. I am not sure what the name of this bias is, but we all use this one from time to time.
What Should You Do: You know what, it’s perfectly fine to trust that your estate-planning attorney did a 100% perfect job and that what they did then still works perfectly now. That said, if only for common sense risk management purposes, have another estate-planning attorney take a look at your plan and discuss it with you to make sure you’re protected, your assets are protected, and your family is protected. At Commonwealth Estate Planning, our estate planning consultations are always free. Whether it is with us at CEP or with another firm or lawyer, the thing to do is to get a new set of eyes on your plan now and again and certainly when you experience any major life changes.
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