The price of procrastination
In addition to hundreds of e-mails seeking general estate planning information, the National Center for the Avoidance of Probate receives a dozen or two inquiries monthly from folks who suddenly or with little warning find themselves with their backs to the wall. A spouse or parent has 1) died unexpectedly, 2) become suddenly ill and is destined for a nursing home, or 3) been diagnosed with logus-on-the-bogus and given just a few months to live.
In almost every case the e-mail or phone call is from someone who once visited our online workshop or attended a live conference center workshop and chose to "go home and think about it." Now, months or even years later, their cry is "Help! Do something!"
It is not my nature to utter a gloating "I told you so!" I feel helpless and have a great deal of sympathy for them. Now at a moment when they look to our firm as a "Mister Fix-It-All," it is always difficult to find the words to tell them that their procrastination may well have cost them many Living Trust advantages that would have otherwise been available to them had they acted sooner.
Procrastination is the byproduct of the fear of the unknown. And fear of the unknown is almost always the byproduct of lack of knowledge or a misunderstanding of the facts. No truer words were ever spoken then when Franklin D. Roosevelt said 70 years ago: "The only thing we have to fear is fear itself." When we have a firm grip on knowledge and facts, almost everyone has the God-given ability to make the solid decisions that ward off trouble and enhance lives. It is the absence of knowledge that creates confusion, distrust and self-doubt. Fear feeds upon itself.
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A Special Breed
Estate-planning procrastination, however, is a special breed. Rather than coming through a lack of knowledge, much of it influences us through deliberately planted false knowledge.
For centuries the legal profession has programmed society to believe that estate planning is tremendously complex and should be left to the sure hands and nimble wits of attorneys. Attorneys could never collect the huge fees they receive by telling their clients that legal procedures are simple and easy.
When I speak of the possibility a Living Trust sans attorney, either in this online workshop or at an occasional conference center live seminar, the initial reaction almost always reflects this decades-old brain washing by the legal profession. Many folks not only believe they will get in terrible trouble by attempting to complete the project without an attorney but are also convinced that it would somehow be illegal to complete it without an attorney.
In estate planning, large legal fees are at stake. Thus, attorneys always place themselves in a win-win situation. If the client chooses a will rather than agreeing to the attorney's expensive and deliberately complicated trust, Probate Court will skim 5 to 15 percent off the top of the estate in attorney fees and Probate Court costs. If the client cannot force himself to commit to either trust or will, the estate then ends up in an "intestate" probate procedure that will still skim 5 to 15 percent (or perhaps even more) off the top of the estate in legal fees and court costs.
Hence, it is a shell game where no matter which walnut the client believes the pea is under, the attorney will end up with 5 to 15 percent of what the client is worth. The attorney’s objective then is not to push the client in any one of these three directions but simply create enough fear that the client will surrender to a position of "I’m yours; take me for whatever you usually charge."
This is the saddest procrastination type of all because it is based not on a lack of knowledge or misunderstanding but rather on the deceit of a profession that American citizens have for more than 230 years looked to for help rather than a soaking.
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In very rare cases of fire, break glass
Most folks concerned about estate planning are home owners. They sometimes own homes in two or more states or locations. Few of them would be without fire insurance on those homes.
It is not unusual to pay out $25,000 - $50,000 over a lifetime for fire insurance on a single residence. And of course there is no permanent fix; a new premium of $200 to $2,000 comes due every 12 months.
Yet, the fact remains that only one out of every 1,200 American homes sustains fire damage in a year’s time. Those are pretty decent odds. But even realizing the chances of a house fire are that slim, I dare say few responsible people would cancel the fire insurance on their properties.
However, 9 out of 10 estates will eventually end up either in costly, frustrating Probate Court - or subjecting the heirs to thousands of dollars in needless capital gains taxes through joint ownership. Very poor odds, indeed!
The cost to probate an estate can easily equal the cost of a major home fire. The cost of "insuring" an estate against this financial misfortune through the use of a Living Trust can be about the cost of a one year’s fire insurance premium. The difference is that this cost takes care of a lifetime of protection from probate and estate taxes. The premium does not have to be paid again and again, year after year.
Why then does less that 10 percent of the population have a Living Trust?
Aside from the fact that a few people are still unaware of Living Trusts and their benefits, I would venture that personal greed plays a major role. Most folks quickly realize that a Living Trust holds no advantages for the grantor (maker) of the trust! Like providing children with a college education, the financial advantages are realized almost exclusively by the beneficiaries of the trust. Perhaps that is why they are referred to as the beneficiaries!
Thus, in the end the decision to act always gets back to how important your children are to you - and how you would want to be remembered by your children.
Is the giving up of perhaps a day or two of self-indulgence and $495 a fair trade-off for saving your loved ones perhaps two years of frustration and several thousand dollars of legal expense and taxes after you are gone?
Is it better that 100 percent of what you have worked a lifetime to accumulate ends up in the pockets of your loved ones - your children? Or would it be more benevolent if a part of your nest egg filtered down after your attorney's death into the pockets of your attorney’s children?
The balance of what you have saved and scrimped for all your life will eventually end up financing grocery bills, rent and car payments, a college education for a grandson, a beautiful wedding dress and reception for a granddaughter, or perhaps a few days on a warm, sunny Hawaiian beach. Who will be the recipricant? Your children - or your attorney's children?
Go to Lesson 10
