Confessions of a Southern California Estate Planning Attorney, Part I

I have been a lawyer in Southern California for over 20 years, but I have a confession: I didn’t have my own estate plan until very recently. I once heard an attorney tell his client that attorneys are the worst when it comes to preparing their own estate plans. I can relate to this.I have noticed this pattern with my own clients and potential clients.

The issues involved are highlighted by a very common initial telephone conversation with a potential client which might start out like this:

“Hello. Nancy referred me over to you. I have a very simple need, as I have never had a will. I don’t think that it should be a very big deal. Is there anything that you can send me?”

I reply: “Yes. I will be more than happy to send you a client questionnaire. It may require some research on your part when filling it out; please send it over when you can complete it. Then, we can set up a meeting.”

“Oh. Okay.”

At this point in the conversation, I already feel the tension. So, I might add, “And there is no charge for the initial consultation. I’ll be more than happy to work through the questionnaire with you.”

I might receive a phone call in a week or two. Eventually, I will probably hear back, or I might receive a message through a mutual acquaintance, something like: “Nancy is still working on the questionnaire.” Sometimes, I don’t hear back at all.

When a client is served with a lawsuit in a California Superior Court, he or she has 30 days to file a pleading in response (or, locally, 20 days in federal court). The unpleasant visit with the attorney is something that is forced by the calendar.

But estate planning is different because many clients and potential clients – even those with a law degree – figure that it can be done tomorrow, or the day after. There is always “tomorrow.” And I fully understand that.

In my next installment I will talk about a different way to think when retaining an attorney for estate planning services.

The Maze of Estate Planning

In a brand new revenue ruling (Revenue Ruling 2008-41), the IRS now recognizes that Charitable Remainder Trusts may be split up on a pro-rata basis and still preserve their tax advantaged status under the Internal Revenue Code.

A Charitable Remainder Trust (known as a CRT in estate planning lingo) allows the charitable give to receive an annuity (under a Charitable Remainder Annuity Trust, or CRAT) or a fixed percentage of the amount in the trust (Charitable Remainder Unitrust, or CRUT) to a noncharitable beneficiary for life, with the remainder to go to a charitable beneficiary. CRTs are highly regulated in various rulings and regulations propounded by the IRS. Under Revenue Ruling 2008-41, trusts can now split up into subtrusts, and still retain their tax advantaged status.

Practically speaking, this shows the intricacies of tax law and how uncertainty prevails over even what is seemingly the most minute of details. One would think, for example, that the IRS would (of course!) look at the overall transaction in interpreting a specific tax approach. But, not necessarily! This small case is a window into tax law, and oftentimes conflicting court cases, Revenue Rulings, and Private Letter Rulings on specific cases. This is "food for thought" for those who would go it alone. Not even the lawyers can figure out this stuff!

The Maze of Tax Law

In a brand new revenue ruling (Revenue Ruling 2008-41), the IRS now recognizes that Charitable Remainder Trusts may be split up on a pro-rata basis and still preserve their tax advantaged status under the Internal Revenue Code.

A Charitable Remainder Trust (known as a CRT in estate planning lingo) allows the charitable give to receive an annuity (under a Charitable Remainder Annuity Trust, or CRAT) or a fixed percentage of the amount in the trust (Charitable Remainder Unitrust, or CRUT) to a noncharitable beneficiary for life, with the remainder to go to a charitable beneficiary. CRTs are highly regulated in various rulings and regulations propounded by the IRS. Under Revenue Ruling 2008-41, trusts can now split up into subtrusts, and still retain their tax advantaged status.

Practically speaking, this shows the intricacies of tax law and how uncertainty prevails over even what is seemingly the most minute of details. One would think, for example, that the IRS would (of course!) look at the overall transaction in interpreting a specific tax approach. But, not so! This small case is a window into tax law, and often times conflicting court cases, Revenue Rulings, and Private Letter Rulings on specific cases. This is "food for thought" for those who would go it alone. Not even the lawyers can figure out this stuff!