At the end of each month, we take stock of elder law news and developments and share them. For the December review, we look less to outside news and commentary and instead think about what we (or others) have learned or wish we (or others) had learned before something unfortunate happened. Here are some lessons from the past year, inspired by our own practice, cases we’ve read about, and rumors we’ve heard. Here are the top ten, in no particular order:
2022’s Top Ten
1. Be Wary of Cutting Corners, Part 1. We’ve seen a number of self-drafted estate plans, many created out of necessity during the COVID-19 pandemic. We expect to see more as time goes on as those documents need updating or the creators die. Many have serious problems. And some are OK but could be better. Few do everything we, as estate planning attorneys, would recommend. The problem is, self-drafters don’t know what they don’t know. After they’re gone, those documents must speak for themselves. At that point, problems can be difficult and sometimes impossible, to fix. Fixes often require court proceedings that easily cost more than traditional estate planning (with an attorney) would have.
2. Be Wary of Cutting Corners, Part 2. In Arizona, we have something called “Legal Document Preparers.” These are people certified by the State of Arizona to prepare legal documents. . They supposedly provide documents at lower rate than attorneys (though in our experience, not by much). While there may be a place for such a service, it’s not without risk, particularly in estate planning. As the legal document preparer website states: “Legal document preparers may provide general legal information but may not give legal advice.” If you know what you need, they can spit out a document for you. But they can’t tell you if you are going astray—even if they know it. That’s giving legal advice, and for that, you’ll need an attorney.
About Your ‘Stuff’
3. Your “Stuff,” Part 1. If you have a Will, get it out and read it. It’s likely that it has a provision that says you can make gifts by creating a document separate from the will. We refer to this as “making gifts by a list.” It’s specifically sanctioned by A.R.S. § 14-2513. On the list, you can describe the items and identify the people those items should go to. It needs to be in your own handwriting and/or signed by you. This type of provision is very common. It’s also commonly misunderstood. As the statute says, lists are for “items of tangible personal property other than money.” That’s your “stuff” – collectibles, jewelry, furniture, your prized cookie jar, etc. NOT money.
Unfortunately, we see lists that include cash gifts. That leaves the estate administrator in a difficult position. He or she can’t legally honor the gift without doing more work, which likely would include a court proceeding. Such efforts easily cost more from the estate than it would have to have simply updated the will.
And More Stuff
4. Your “Stuff,” Part 2. Anyone who administers estates or represents those who do will tell you that managing tangible personal property is one of the most frustrating aspects of estate administration. Why? The cost to sort it out can easily far exceed the value. As fiduciaries, we must be mindful of expenses. Spending more than something is worth to distribute it is frustrating. With that in mind, look at the provision in your will and/or trust concerning tangible personal property. Think about how that plays out and what it might cost. Consider a revision to provide specific instructions. Be clear about who gets what (and you can use the lists!) and then what happens with what’s left. (Consider: donation or the dump. Anything but letting the beneficiaries fight over it!)
Spending a lot of time and attention on items of little value may seem a little pointless, but that’s exactly why it’s important. If you spend time now, your estate may save a lot later.
Your Digital Life
5. Daunting Digital Developments, Part 1. More and more of our lives are taking place in the digital realm, and that can create challenges for estate administrators. On many levels. Start with the basics: What assets are there and how can they be accessed? Consider: how will your executor know about an account if statements are delivered to an email address that cannot be accessed? Think about creating a comprehensive inventory.
6. Daunting Digital Developments, Part 2. If you have cryptocurrency, NFTs or other blockchain assets, do some additional planning. Find out what happens to them when you die. (That information is probably buried in the terms of service agreement). Make a plan to communicate the details to your executor without compromising current security. It’s a challenge.
4 of the Top Ten: Spouse Issues
7. Single Again, Part 1. In Arizona, divorce is supposed to automatically sever your former spouse’s interest in assets other than those governed by ERISA, which falls under federal law. (ERISA generally governs workplaces. So Arizona law would not, for instance, affect your 401(k).) Do not rely on state law to do that work for you. Convincing the financial institution holding the asset that state law governs can be a time-consuming hassle. Change the ownership yourself so there are no issues. Keep a copy of forms you submitted to change the beneficiary.
8. Single Again, Part 2. Widows or widowers also have some work to do. Consider outsourcing. Grieving takes time, and a surviving spouse should take all the time he or she needs to adjust. Estate administration, however, shouldn’t wait very long. This is one of the most important times to get professional advice. This is particularly important if you have a trust that talks about splitting assets at the first death. Enlist your estate planning attorney to review the document and, at minimum, provide an explanation.
More Marriages: Planning Challenges
9. Starting Over, Part 1. Say you have a trust and you’ve decided you don’t want one anymore. Or your life has changed (maybe you now have a new spouse) and want to start over with a fresh trust. Be careful! Consider what happens if assets are left under the old trust’s name. If the prior trust is revoked or is not addressed under the new plan, it will take some (perhaps expensive) effort to untangle your estate. Keep a paper trail of what you have done: a copy of the estate planning documents as well as beneficiary designation forms you submitted to the custodian.
10. Starting Over, Part 2. If you are creating a plan with your second (or third or fourth) spouse, be careful. A common plan allows a spouse to have access to assets for his or her lifetime, then those assets pass to the deceased spouse’s kids from a prior marriage. The difficult question becomes who controls those assets during the lifetime of the surviving spouse. Plans that expect the surviving spouse and his or her stepchild to work together are fraught with peril. Plans that put either the spouse or the stepchild in charge are not much better. Consider a neutral, professional fiduciary. They may charge a fee, but it may be worth it to keep the peace.
That’s the 2022 review. Cheers to 2023. Happy New Year! It’s going to be a great one.