Today, I’d like to revisit the idea of estate-planning maintenance plans. There is a new trend developing in which people can not only receive the requisite documents from their estate planning attorney, but can also pay an annual fee to have the attorney provide necessary updates and guidance as your life, your circumstances and even the law changes. The key advantage is that it will shift estate planning into a relationship-based arrangement with your friendly neighborhood lawyer.
Aw, come on, it’s bad enough that you lawyers charge such high fees. Now you want to charge more each year?
Well here’s the thing. Over half of all adults in this country still don’t even have a will, whereas all adults need one. Why? Probably for two main reasons – 1) people do not understand what benefits or consequences result from getting one; and 2) they believe that only the rich need one.
On top of this, estate planning has traditionally been viewed as a transactional relationship. In other words, most view estate planning as meeting with a lawyer two or three times over a couple of weeks, getting the necessary documents, and then that’s it.
Unfortunately, getting an estate plan is not a static process – it’s not a “one-and-done” scenario.
Huh? You can’t just get a will and be done with it?
It has been suggested that the average will or estate plan has been in existence for about 20 years. In other words, amongst those who have an estate plan, the average person’s will was drafted in the early 1990s and has not been updated since then.
Let’s take a brief look at some of the major estate law changes that have occurred since 1991:
- The Omnibus Budget Reconciliation Act of 1993 – A maximum 55% tax rate on taxable gifts over $3 million. Estate tax exemption for an estate’s first $600,000.
- The Taxpayer Relief Act of 1997 – Provision to increase estate tax exemption to $1 million by 2006. Also created deduction for family businesses exceeding 50% of the total estate.
- The Economic Growth and Tax Relief Reconciliation Act (EGTRRA) of 2001 – Gradual increase of estate tax exemption from $1 million with 50% maximum rate to ultimate repeal in 2010.
- Tax Relief Act of 2010 – Unification of estate, gift, and generation-skipping transfers to maximum 35% tax rate with exemption on first $5 million. Rules in place for 2011 and 2012 only.
- It has also been estimated that between 1981 and 1999, 126 new estate laws were enacted.
- These do not include state law changes, including some states that now charge estate taxes under completely different exemptions and rules from federal law.
In other words, there have been four major tax bills and dozens of minor changes in federal estate law over the last 20 years alone. These also do not include any additions or subtractions in one’s family or their financial situation.
Is it a stretch to conclude that the laws may change again over the next 20 years (let alone the next two, when the 2010 act expires)? Can you see why changing your estate plan every once in a while is necessary?
OK, OK, so my will needs to be updated often! But an annual fee? How can that be justified?
Well, do you pay ongoing fees for any of the following?
- Life insurance
- Homeowner’s insurance
- Auto insurance
- Health insurance
- Financial Planning Services
- Credit Cards
- Fitness Club
- Professional Memberships
- Online Storage
- Bookstore Memberships
- Vacation Clubs
- Etc., etc., etc.
Isn’t making sure your assets pass along to your heirs efficiently and effectively at least as important as any of the above?
Point taken, but when it all boils down, isn’t this just another way lawyers are trying to make money?
Look, I’m not going to tell you that estate planning lawyers aren’t trying to make a living.
However, consider that the traditional model of getting a will is really not working, as evidenced by the fact that it is obviously not viewed as essential by many millions of people. Until we personally have to go through the loss of a close relative or friend, and the resulting arduous probate process during one of the saddest periods of our lives, we do not even think about it. Unfortunately, our strategy of ignoring the problem merely perpetuates more difficulties later.
Now, estate planning practitioners are reacting to the perceived shortfall by changing their practices away from mere simple document preparation towards establishment of a long-standing relationship with you and your family. As in any such relationship, the oversight works in two ways: the lawyer over your changing situation, and you over the lawyer.
To me, the maintenance plan is less about making a quick buck than it is about developing further trust and understanding between lawyers and clients, and the lawyer truly working as your advocate.
- Our LifeChoices Maintenance Program (www.kurilofflaw.com)
- The Outlook for Estate Planning Practitioners (www.wealthstrategiesjournal.com)
- Estate Plan Maintenance (maewhitaker.co.cc)