Recently, we had a client (we’ll call her Sally) send us a couple of estate documents that she and her husband, now deceased, had created online and ask whether they were effective. These days, with the pandemic giving people time, and also a reason, to review their estate, that has become a very popular question. We told Sally that, as a general rule, online forms with fewer blanks are actually more dangerous than those with many blanks to complete.
That observation may seem counterintuitive, but if you stop to consider what it means when an estate document has very few blanks, it should make sense to be very careful with those forms because someone else has done all the thinking for you. At least a form with blanks is allowing, or even forcing, you to think for yourself; and we believe that is never a bad thing to do.
However, be forewarned that when you start to think for yourself in an estate setting, the questions you ask are as important as the answers you give. As a quick example, if you fail to ask yourself about how your home should be titled, you are missing a potentially critical element of your estate plan. If you do remember to ask yourself that question, then the answer you give can also make a huge impact on your plan. Research the difference between holding property as a co-tenant instead as a joint tenant and you will see what we mean.
In the end, we always urge clients or readers who consider online options to be very cautious because most people are not aware of the line between what they know and what they don’t know. That makes it difficult to understand the forms with very few blanks because so much has already been decided; and it makes filling in forms with several blanks difficult because it is hard to know what the options really are. And, of course, these days it is a little more difficult to meet some of the logistical requirements, such as the need for a notary and two legal witnesses.
Still, we understand the thinking “why pay more when I can pay less?” And we agree that for straightforward estate documents, many online options can be effective. The obvious problem is that people rarely know whether their situations are straightforward, so for most people, it boils down to peace of mind. If you can sleep well knowing that your estate matters are taken care of with an online form, then not many people will be able to talk you out of that option. By contrast, if you are even asking yourself the question, then you probably do not have the peace of mind that you can have with an estate plan that has been prepared with a professional’s help.
We started this article by introducing you to Sally; we used her experience because in addition to her question about the reliability of her online estate documents, she also had concerns over another common scenario. She and her husband had used a lawyer to create a trust more than 2 decades ago, but they never moved any assets into the trust. We addressed that question a few columns ago, prior to the COVID-19 taking over our lives, and dealt with the most popular types of asset transfer, including real property, assets with a certificate of title (such as a car), and bank and investment accounts; if you missed it and would like a copy, please email us and we’ll get it to you. Here, we want to close out that topic with a couple more reminders.
To make sense of what it means to fund a trust, you need to remember that a trust is actually a separate legal entity that is created when the trust is formed; creating the trust is only the beginning of the process because the assets that you want to include in the trust have to be moved there. The process of placing assets into the trust is called “funding” the trust and the letter that every estate planning law firm uses is called a “funding letter.” Different types of assets require different processes to get the assets into a trust, so the funding letter will address those details, but for purposes of this article, we can only address the type of assets transferred. When it is time for you to transfer valuable assets or when you are working with a complicated transfer, we encourage you to work with a professional familiar with the transfer process for that asset.
Assets such as retirement accounts, life insurance policies, time-share accounts can be moved into a trust by using the forms that the account holder will have for you; family-owned businesses and other assets that have no title or certificate of ownership can also be moved to a trust, but require the help of an advisor to make certain that the transfer to the trust is effective and complete. And, finally, assets that are purchased in the future should be placed in the trust from the outset, if at all possible, unless there is some other reason to keep the asset outside the trust.
We discuss these, and other, estate planning matters in our no-cost seminars. Due to the precautions we are all taking in light of COVID-19, we are changing the format of these seminars to telephonic participation so that we can be careful, but still share relevant estate planning information to as many people as possible. If you are interested in participating, or if you have any questions about this article or topics you would like us to address in future columns, send an e-mail to Kkeim@GJlawyer.com or call (970) 270-1213, ext. 4.
Brad Wright’s business and estate planning practice includes transactional matters with a special focus on business succession. His brother, Steve Wright, has a similar law practice in Idaho Falls, Idaho and, together, they assist businesses of all sizes and types with a wide variety of legal issues.
© 2020 Brad R Wright, Steven J Wright