Are Online Living Trusts a Problem?

Dear Mr. Miller:

I’m a senior living in Southern California.  I have a house and $500,000 divided pretty equally between cash and securities.  I have two kids.   I don’t yet have a Will or a Living Trust and know that I should have one.   I can get one online for $350-450.  With an attorney it is going to cost $2000 and up.  What do you think of the online variety?

Wondering Senior

Is There a Benefit to Having an Attorney Review an Online Created Trust
What Kind of Problems Can I Run Into
Does It Matter What Your Trust Says While You Are Alive and Well
Valid vs Effective
What is the Value of an Attorney
We Can Help

Dear Wondering Senior:

Is There a Benefit to Having an Attorney Review an Online Created Trust:  In my 40 plus years of being an Estate Planning Attorney I have seen a lot of Living Trusts (the garden variety trust that most people have) written by others. Mostly written by attorneys but sometimes put together by insurance sales organizations.  Often, to make the customer feel comfortable, these organizations said that each trust was reviewed by an attorney.  They may have been, I don’t know.  But I am reasonably sure that the organization did not have the best of the best in that back room reviewing the documents.  For all I know, he could have been the worst of the worst with no knowledge of estate planning other than the most rudimentary of things such as what it takes to have a valid trust (note that that is different than an effective trust).  Some of these online companies have an option to have the online created trust reviewed by an attorney.  I think the same caveats go with the online version as the insurance sales organization version.  You don’t really know the quality level of the person reviewing the document.

What Kind of Problems Can I Run Into:  But let’s go one level deeper.  In both the online or insurance sales organization, you are not going to have an attorney guiding you.  And by that I mean, no one is going to suggest that maybe leaving 80% to one child and 20% to another may cause a problem, or asking you whether the two kids you named as co-managers (co-trustees, co-holders of the power of attorney, etc.) get along or not, or whether leaving $10,000 each to 20 nieces and nephews and the rest to your kids might create some serious issues causing the settlement of your estate to significantly rise in attorney fees (yes, even with a Living Trust, the estate will not be settled in 30 minutes nor will it settle without attorney’s fees).  Or whether having the life insurance money go directly to the 3 kids, none of whom get along, and the real estate without any cash going to the three kids via a trust is a miserable idea. This being the case because how are the taxes, insurance, or repair costs so the house can be sold going to be paid as none of the kids trust the others enough to front the costs.  Any of these situations could cause monumental difficulties and it is the attorney’s job to delve into these with you, simplify, clarify, and maybe avoid.  An attorney in the back room of an online or insurance sales organization is likely to have little to no direct contact with you to ask these questions and even if he/she did is probably not experienced enough to recognize these issues as a potential problem and know how to work around them.  And, by the way, what do you think they pay these attorneys in the back room?  In the two situations in which I was solicited for this type of employment it was not much–so they typically are not going to get experienced attorneys taking the job.

Does It Matter What Your Trust Says While You Are Alive and Well:  And let’s take a moment to talk about saving on cost.  No matter what attorney you go to (or sales organization), you are going to walk out of the office at the end of the line with pretty looking paper (online, you probably have to print it out yourself–so maybe not as pretty).  That’s what you have, pretty looking paper!  Until the rubber meets the road, no one cares what these documents say; not the Probate Court, not the IRS or any other taxing agency, not the State–no one cares.

Valid vs Effective:  So when does the rubber meet the road—when you lose mental competence (such as a stroke or advancing dementia) or die.  That’s when people start caring about what the documents say.  And those documents need to work at that point in time.  And they need to work effectively and efficiently.  If no attorney has actually been involved in the drafting, and I mean here more than just taking a cursory look at the document(s), the effectively and efficiently may just be a quickly evaporating hope.  And no attorney, including myself, can just take a look at the document (without having actually interviewed the client, in depth, about what they want, the family dynamics, your health, your wealth, etc.) and determine whether the documents will take care of things effectively and efficiently.  We can take a look at the document and, at least in some cases, determine whether it is garbage or not. If it is at least written above that level, without the in depth interview we still don’t know whether it will take care of things effectively and efficiently.  And that’s the problem with online and similar trust drafting operations.

What is the Value of an Attorney:  If you have a house in Southern California I’m going to guess that it’s worth at least $1 million.  That and your other assets place you at the $1.5 million net worth level.  So I’m just wondering, a few thousand dollars isn’t worth it to you to have a high probability that when you die (or lose mental competence) things will be taken care of effectively and efficiently?  Because the value of an attorney is not who can produce the prettiest looking paper but rather who can guide you in making good estate planning decisions that will benefit you and your family.

We Can Help:  Give us a call at 760-436-8832 so we can answer your questions and guide you in solving your estate planning problems.