Reality: If you’re okay wearing your grandmother’s clothes, her trust should also “fit” you just fine.
This myth is a variation on myth 5, the self-help myth, and myth 12, that you can download the legal forms you need from the Internet. One middle-aged client of mine told me her older sister was planning on just taking her mother’s forty-year-old trust, copying the pages, changing the names, and voilà, signing it and making it her own estate plan. This older sister did not invent this idea; it’s one that many people have tried over the years but with varying degrees of success and sometimes very dire consequences.
My point about borrowing grandmother’s clothes may seem as silly as my do-it-yourself surgery scenario, but it’s just as appropriate and accurate. Just as grandmother’s clothes would be old, outdated, inappropriate, and most likely the wrong size for her granddaughter, it’s the same with grandmother’s estate planning documents; even if they happened to be just a few years old, they’re almost certainly not the right “fit” for the granddaughter.
Tax laws and various other federal and state laws applicable to the world of estate planning are constantly in flux; new laws and regulations can crop up yearly, and they certainly have changed dramatically over the past fifteen years, even more dramatically over the past forty years. For example, since 1975, the Estate Tax Exemption has been changed twenty-two times; the “threshold” amount (over which your estate is subject to estate tax) has gone up from $600,000 to $5.34 million today, and the estate tax rate has ranged from 35 percent to 77 percent during that time. This means that estate plans created under the tax regime of 1992, or 2006, or any time that’s more than two or three years ago—are likely out of date and not a good “fit” for someone who’s looking to establish a plan today.
Just as “borrowing” someone else’s prescription is a bad idea, borrowing someone else’s estate plan or any such individual (and individualized) legal document is a bad idea. The fact that grandmother has a two- or three-page trust suggests all by itself that her documents are out of date. Best practices in the estate planning profession are that its practitioners err on the side of safety by creating longer, more-detailed, more complete, and customized planning documents for several reasons. One is the necessity of making sure an estate plan complies with the many different tax provisions. Another is that due to the increasing volume of lawsuits, many financial institutions and other companies are insisting on very specific authorizations in estate planning documents to enable personal representatives and/or trustees to access assets upon the disability or death of the person who owns the estate plan.
Though it was once permitted to just say something like, “I give my trustee permission to do whatever he/she needs to do,” it’s now better practice and sometimes required to have specific authorization and permission for every possible contingency that might come up. This can include having a catchall “and permission to do anything and everything else we have not specifically listed.”
This, like many of the other points raised earlier, can certainly be debated by attorneys (after all, attorneys are trained to argue all sides of any issue). However, at our firm, we err on the side of caution, listing and accounting for just about everything on the theory that we don’t have a crystal ball so we don’t know exactly what will happen to any one of our clients. That drives us to include as many protections and helpful tools as possible. We want to avoid any situation in which a client or his or her family needs a “tool” or legal authorization down the road but doesn’t have what they need in the documents and so they have to pursue other remedies. For these reasons and others, we use a lot of paper in our estate plans. As a result, we sleep better, and our clients sleep better.
It’s comforting to know that you and your loved ones are prepared for whatever might come. This preparation and knowledge can give you something priceless—peace of mind.