by Francis Burton Doyle, Esq., WealthPLAN
It was 1999 and I was at a cocktail party at the home of one of my clients in Los Altos Hills. I walked out on the veranda of the 7,000 square foot, newly constructed, adobe colored plaster mansion, which sported a gorgeous view of Stanford University’s Hoover Tower. My client’s Internet Company had gone public the year before and the mansion was the product of its success. My client’s boss, the CEO of the company and a prominent member of Silicon’s Valley’s digital plutocracy, approached me. He asked me, what do you do for a living? I was afraid to tell him that I was a lawyer, who drafted wills and trusts, for fear he would want to take my pulse to see if I even had one. Fear sparked inspiration, and I responded, “I design and implement fully integrated wealth planning systems.”
At the time I didn’t reflect upon the truth of my glib remark. I was simply happy that the CEO smiled at me in a way, which seemed to welcome me as part of the crowd.
This realization happened when I started stressing the importance of “integrating ” the client’s wealth plan as a system. This concept includes viewing the wealth preservation process as a system and not simply as one or another isolated planning technique such as a will or trust. Over the thirty years that I have been a practicing attorney, so much has changed. When I began my practice, attorneys and other wealth planning professionals, focused almost exclusively on the client’s will. Shortly after I started practicing law, the revocable living trust came along and for the next ten years the focus shifted to planning and drafting the living trust. With the advent of the revocable living trust, the concept of “integration” germinated when I saw the need to coordinate a client’s revocable living trust with the client’s will.
Clients would ask “why do I need a will if I have a revocable living trust?” I would explain to them that even when they had a living trust and had properly transferred their assets to it, they still might need an executor with appropriate powers to manage assets and matters, which were not technically a part of their estates. For instance, an executor might be needed to deal with assets, which a client was not able to transfer to his or her because they had not yet been actually received by the client, at the time of the client’s death. As an example, a client may have an interest in the estate of a relative, which hasn’t yet been distributed. Another case where an executor would be needed would be to initiate or defend lawsuits or claims involving the client at the time of death.
Consequently, not only did the client need a will, but also that will needed to be “integrated” or coordinated with the client’s revocable living trust. The most typical way for this to done was for the client’s will to “pour over” into their revocable living trust by making the trust the residuary beneficiary. In addition, the drafter of the will had to be sure there were no provisions in the will, which would conflict with those of the revocable living trust. For example, if the will left the client’s clothing, jewelry and furniture to a particular person it was necessary to have a corresponding provision regarding these personal items in the client’s revocable living trust.
Over the years other techniques came into vogue. The durable power of attorney is one such technique. The durable power of attorney allowed for a client to appoint an agent to act on his or her behalf regarding financial affairs in the event the client became incapacitated. If one person was appointed under the durable power of attorney and another person appointed as successor trustee of the revocable living trust, there existed the real potential for a conflict regarding the management of the client’s assets. Who would be the boss then– the holder of the durable power or the successor trustee? These are just some of the issues that must be reconciled in the drafting of both the durable power of attorney and the revocable living trust.
Today the need for “integrating” the client’s wealth plan is even more critical. In many cases, a large portion of a client’s net worth consists of their interest in an IRA, 401(k) Plan, or deferred annuity. The succession to these assets is not controlled by either the client’s will or trust. The beneficiary designation attendant to the IRA, 401(k) Plan, or deferred annuity, controls who will receive the proceeds in these accounts when a client dies. In the process of creating the client’s wealth plan; it is imperative that these beneficiary designations be coordinated with the other elements of the plan.
Moreover, I am finding that an increasing number of financial institutions are establishing accounts for clients, which are controlled by beneficiary designations. Consequently, a practitioner can no longer assume that succession, to an account in a client’s name, is controlled by his or her will or trust, unless the actual title to the account is properly transferred.
When I started practicing law, the IBM Selectric typewriter was the state of the art word processor, this device made the production of will and trust documents an arduous adventure. To say that modern word processing techniques have made producing wealth planning documents exponentially less difficult would be an understatement. However, the variety of client asset types and the many different ways of controlling their post mortem succession, has made wealth planning more complicated because the practitioner must investigate, analyze and design the wealth plan as a system. In this environment no one document or technique can be viewed in isolation. The will must integrate with the trust. The trust must integrate with the durable power of attorney, and the titling and beneficiary designations of the client’s various assets must be coordinated with the entire wealth planning system.
Quote to Ponder
“There are risks and costs to a program of action
but they are far less than the long range risks and
costs of comfortable inaction.”
~John F. Kennedy
About the Author:
Francis Burton Doyle, Esq., is the founder of WealthPLAN, with over 30 years of experience in Tax, Estate-Planning Probate, Trust Administration and Litigation. He is Certified Legal Specialist, Taxation Law and Probate, Estate Planning and Trust Law (California State Bar). Frank is the Past President of both the Santa Clara County Estate Planning Council & the Silicon Valley Planned Giving Committee. Frank is also the Past Chair of the Planning Committee, Annual Jerry A. Kasner Symposium, Santa Clara University, School of Law. Mr. Doyle provides all the course development and instruction for the Advanced Legal Training Institute.
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