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Give Me Simple! Simple Will, No Living Trusts. No Long Documents. Easy to Understand. Got It or Not It? Estate Planning Mistake #3

Roger McClure Sept. 17, 2015

Your smartphone is smarter than you are. You use only five features. There are a dozen more features that came with it, but why bother. Your 15-year old technical advisor has told you that you must “download” dozens of “apps” but you don’t know why you need them or how to use them. Download? What is he talking about? And speaking of talking, your kids don’t even use their phones as phones anymore! What is the world coming to?

Your car’s dashboard looks like an airplane cockpit. Your car can already park itself; soon it will be driving itself. Maybe it will get a job and pay for its own maintenance soon, too.

Your laptop does things you don’t tell it to do. You spend a lot of time together, so it thinks it knows you, and suggests things it thinks (thinks?) you might like. And sometimes it is right. It’s a bit scary, really.

Speaking of that laptop, you keep 36 passwords for 36 web sites on it, all protected by a firewall of anti-spying and virus software that need upgrading regularly to prevent prying eyes from finding your precious info. But when a site asks “Do you want me to remember you” you say yes and negate all that firewall protection. Who knew?

And don’t even try to understand how your TV’s remote control works. Call the Help Desk…or your 15-year old technical advisor.

But it isn’t just technology that is out to get you. You can’t even trust food anymore! A few years ago, eggs were bad; now they are good. Coconut cream, which used to be bad, is now good. Ditto with coffee: once bad, now good. Cholesterol in dairy cream is bad, but cholesterol from fish is good. Huh?

Danger and confusion lurk everywhere. Pain pills kill more people than automobiles each year. And there are thousands of people who don’t know you, but want to kill you because of something that happened in the Sixth Century.

And “authorities” are constantly telling you how to run your life. Every day there is a new law or regulation from the city, county, state, Congress, and twenty something different agencies of the federal or state governments. Your homeowner’s association will not you let you have a purple door, fly the flag of your favorite soccer team, or have a gnome in your yard. Your fashionista teenager can’t wear certain colors because they may be “gang colors”…her friend on constant-drip chemotherapy can’t come to school because her meds are a “dangerous weapon”…and the kindergartener who points his carrot stick (another “dangerous weapon”) and says “bang” in the lunchroom is suspended.

Life has gotten so complicated. Maybe it is time to KISS it.

That is what Irwin thought when he visited his attorney, Harry, to write a new will.

Just a Simple Will!! Please! Irwin is desperate for something—anything!—to be simple in his life. Harry had gotten him out of an expensive speeding ticket, defended him in his first divorce, negotiated the property settlement in his second divorce, and got a reduced sentence for his son Jerry for drug possession.

Irwin was downsizing and simplifying. Or so he hoped.

Irwin: “Harry, I have a simple life now and I just want a simple will.”

Harry (attorney): “It’s great to see you again, Irwin. We do simple wills all the time. I don’t see why most people need some fancy complicated trust and a whole notebook of documents.”

Irwin: “So, what do we do?”

Harry: “Irwin, how is it going with your third wife, Nancy? Are you still paying child support for children from wife one and wife two? How many more years of that?

“What happened to your son Larry who was in an auto accident, had a head injury and is not able to work? Are you still responsible for his care? And what about your other son, Jerry, a drug addict who has gone bankrupt three times? Is he out of prison yet?

“Do you still have those three rental properties in your name? One of your tenants sued you for $1 million because of mold in his rental unit. How is that suit going?

“Speaking of business, which of your three businesses are you still operating? What happened in the lawsuit with your partner in Irwin-Smith Enterprises?

“Your son in law, Angus, who is in the Flintstone Freaks, had your daughter Iris cash in all her retirement funds, and reinvest in a risky venture. You told me that he had lost everything, but he and Iris got a Las Vegas vacation out of the deal. Are you worried about Angus?

“How about that nice new home you bought Nancy where the mortgage is now higher than the market value? Does she still buy new living room furniture every year, buy a lot of jewelry, and take luxury cruses by herself three times a year? And what has she done about that $55,000 IRS tax lien?

“What is your health like after your second heart attack? Oh yes, you also mentioned that your Doctor was worried that you are developing Alzheimer’s. Anything to report?”

Irwin: “I’m handling all of that. But, you are right. My life is complicated. That is why I want something simple in my life, like a simple will.”

Harry: “I think you have a complicated situation. I am not sure a simple will is the right thing for you. Maybe, you should go to a specialist in estate planning.”

Irwin: “I don’t want some expensive fancy pants lawyer who will give me some big book with a bunch of legal mumbo jumbo I frankly will never understand. I’ll think about it.”

Irwin finds another lawyer that does cheap, simple wills. He leaves 20% of his estate to his third wife Nancy and the rest to be divided equally among his children. He signs a general power of attorney, giving his third wife control over all of his assets.

Sadly, Irwin’s third marriage continues to deteriorate. Nancy, his high spending wife, flees town with a smooth talking, handsome, elegant, penniless singer in the oldies band she met on a cruise ship off the Amalfi coast. Before she leaves town to be with her cruise ship Romeo, she cleans out Irwin’s bank, savings, and stock accounts using Irwin’s general power of attorney.

Upon hearing that Nancy—and most of his money—have left Dodge, Irwin has a stroke and is no longer able to handle his affairs. Irwin’s oldest daughter Mary from his first marriage does not want Nancy to exercise her powers under Irwin’s power of attorney. Mary petitions the court to have a guardianship proceeding to take over all decision-making for Irwin and away from Nancy. Mary initially pays $15,000 for attorney fees and costs for experts out of her own pocket. Jerry, Nancy, and Iris (pressured by Angus) oppose Mary and ask the Court to appoint an independent guardian.

Irwin’s costs for the guardianship, health care, and nursing home are running over $18,000 a month. The guardian has to fund the costs by making withdrawals from Irwin’s remaining retirement accounts and has to pay taxes on every penny taken out, except where covered by offsetting deductions. The IRS tries to levy Nancy’s tax lien on the assets of Irwin.

Irwin dies. His house, remaining cash accounts, and large life insurance contract all go to Nancy because Nancy is on title to the house and the remaining cash accounts with a right of survivorship and is the primary beneficiary on the large insurance policy. Nancy gets about 80% of Irwin’s estate.

But, Nancy and her gigolo boy toy are not home free. The IRS seizes the insurance proceeds received by Nancy to pay off the IRS lien.

The mortgage lender forecloses on the home resulting in $100,000 remaining deficit in the amount Nancy, the note cosigner, still owes. The lender collects the $100,000 plus $30,000 in attorney fees from Nancy. Between the IRS, the lender, and the gigolo, Nancy is left with virtually nothing.

A $32,000 IRA goes to Jerry because he is named as the only beneficiary on that account. Jerry’s creditors snatch up all of the IRA funds because an IRA inherited outright by a child is not protected.

The second wife gets $150,000 from an insurance policy payment as required by the divorce decree with the second wife. Except for this $150,000, the two former wives and their children get nothing, not even mementos. No one could agree which memento goes to whom and Irwin has left no directions as to allocation of his personal possessions. Irwin’s executor has to sell everything to pay the expenses of probate.

Most of us do not have as complicated lives as Irwin. Or so we think. Do not assume your children will cooperate after you are gone just because they behave while you are watching them.

Through the use of a living trust, Irwin could have avoided nearly all of the problems he—and his heirs—experienced.

Ever since the publication of How to Avoid Probate in 1965 by Norman F. Dacy, Americans have been using living trusts in greater numbers on a routine basis to avoid probate, reduce taxes, and provide protective trusts for their loved ones. In most cases, an estate plan that accomplishes your goals will require the right combination of a living trust, pour over wills, powers of attorney for assets and health care decisions and proper beneficiary designations.

Are there cases where a simple will is sufficient? Maybe. I used a simple will for a widow with only one marriage, no real estate assets, enough money to pay her nursing home bills, and one very trustworthy daughter who was her sole heir. Even then, that simple will may not have protected her from the disaster of a guardianship.

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