InterActive Legal Blog

Healthy Debate Shines Light on Automated Drafting

by Vanessa L. Kanaga, Esq.

A recent set of articles published in the February issue of Trusts & Estates discusses the pros and cons of using Document Assembly Systems (referred to in the articles as "DAS"). The articles are nicely presented as a Point/Counterpoint feature. In the first article (the "Point")[1], Jonathan G. Blattmachr[2] and Martin M. Shenkman[3] discuss the advantages of using DAS in an estate planning practice, ultimately reaching the conclusion that DAS are a must for estate planning attorneys, because they offer the consistency and efficiency needed to stay competitive in the market. In the “Counterpoint” article[4], Douglas J. Paul[5] warns of the dangers of using DAS in an estate planning practice, primarily focusing on the concern that attorneys will become overly reliant on DAS, rather than applying their own expertise in planning and drafting documents for clients.[6]

Certainly, it goes without saying that my colleagues and I appreciate and share the views expressed in the Blattmachr and Shenkman article. However, what may come as a surprise is the extent to which we respect and welcome the objections and concerns discussed in the Paul article. It may be tempting for those of us in the DAS business to sweep the counterpoint article under the rug, or argue that it reflects an outdated view that will be irrelevant in the near future. Yet, the truth is that Paul raises reasonable points that should be in the mind of any good attorney considering the use of DAS in practice. In fact, I venture to say that those of us in the industry are intimately familiar with the concerns raised in the Paul article, because we face them every day, in addressing the questions of prospective customers, and in the decisions we make regarding our systems and the documents within them. The Trusts & Estates articles shed light on these concerns, creating a welcome opportunity to address them in an open forum. In this post, I will discuss how the concerns raised by Paul, though valid, can be addressed by selecting the right system for your practice.

No Time to Waste

© 2019 by Jonathan G. Blattmachr & Martin M. Shenkman. All Rights Reserved.

With the estate, gift and GST exemption at nearly $11.5 million and scheduled to grow until 2026 when they will be cut in half, few advisers are focusing on wealth transfer tax planning for their clients. And even fewer clients at wealth levels that are not significantly in excess of the current exemptions, e.g. couples perhaps under $25 million, are considering planning options. That may all prove a costly mistake. But nothing seems ever to stay static. And if the political winds turn sharply Democratic, there is a real likelihood that tax changes of extraordinary measure may occur. The good news for some is that the deduction for state and local taxes may be fully restored. There may be bad news for others, such as those holding stock in corporations that may have their income tax rates increased dramatically.

In any case, there are proposals (many of which have been made before) that would drastically affect estate tax planning. Many of the components of the proposals include restrictions on estate tax planning similar to those contained in President Obama’s Greenbook. The climate has also changed. There is an increasing chorus of complaints to the effect that the “wealthy are not paying their share of taxes.” This sentiment may have been compounded by the recent scandal of wealthy and famous people paying bribes to secure college acceptances for their children. Overall, this environment should cause worry for those of wealth and motivate them to act while they can. And because most estate tax planning typically takes years to produce significant positive results, it seems appropriate for practitioners to consider that impact of the proposals on their clients, advise them of potential changes and, at least in many cases, encourage them to act now. There are also significant benefits to beginning planning earlier, rather than waiting for more certainty that the law might in fact change. Every practitioner remembers the rushed transactions at the end of 2012 when it was believed that the exemption might decline from $5 million inflation adjusted to $1 million in 2013. Many of the plans were implemented with inadequate thought and planning, too short of a duration between asset transfers and trust funding and more. These problems were not the result of practitioners and clients both not knowing the risks, but rather were the inevitable result of the compressed time frame during which planning had to be completed. No one should want a repeat of that scenario.

One set of proposals is set forth in Senate Bill S. 309 introduced by Bernie Sanders. S.309 — 116th Congress (2019-2020), dubbed "For the 99.8 Percent Act" (“Proposal”). The title alone reinforces the anti-wealthy sentiment that seems to be growing. Here are some highlights of the bill and a brief discussion as to what the changes mean for certain clients and, perhaps, what they should do.

No One Can Read My Email, (And Other Myths in the Practice of Law Today)

By Michael L. Graham, Esq.

Your law firm email is secure, right? If it were not, you would have issues with your state’s ethical rules requiring you to keep client confidences. As a summary and guide for the multiple state ethical rules, ABA Model Rule of Professional Conduct §1.6(a) provides:

A lawyer shall not reveal information relating to the representation of a client unless the client gives informed consent, the disclosure is impliedly authorized in order to carry out the representation or the disclosure is permitted by paragraph (b).

Carrying this focus further, §1.6(c), provides:

A lawyer shall make reasonable efforts to prevent the inadvertent or unauthorized disclosure of, or unauthorized access to, information relating to the representation of a client.

First, are your laptop and desktop computers password protected, do they have locators on them so that they can be tracked if lost, and do they contain remotely activated erase software so that one can remotely erase the hard drive if someone tries to connect a stolen laptop to the internet? Is this important? ABA Formal Opinion 477R (revised May 22, 2017) tells us:

A lawyer generally may transmit information relating to the representation of a client over the internet without violating the Model Rules of Professional Conduct where the lawyer has undertaken reasonable efforts to prevent inadvertent or unauthorized access.

A New Face for Estate Planning

©2019 by Jonathan G. Blattmachr & Daniel J. Scott. All Rights Reserved.

Introduction

For decades, the primary focus of estate planning lectures and publications was about preserving the maximum value of an estate, primarily through estate tax planning. The emphasis was paying less tax in order to transfer more wealth to future generations using techniques such as irrevocable life insurance trusts, corporate and partnership “freezes,” grantor retained income trusts (GRITs), qualified personal residence trusts (QPRTs), grantor retained annuity trusts (GRATs), installment sales to grantor trusts, (family) limited partnerships (FLPs) and making lifetime gifts under the protection of the gift tax annual exclusion or to avoid transfer tax on gift tax paid. This seemed to make sense for many Americans when the estate and gift tax exemptions hovered around $600,000 or $1,000,000. In some states, the combined state and federal estate tax could exceed 50%. As a result, an individual dying with $1 million in assets could end up leaving her heirs less than $500,000. Virtually all of these arrangements involved changing the nature of what was owned by the time of transfer, whether during lifetime (by sale or gift) or at death. For example, the value of a limited partnership received in exchange of other assets, such as market securities, likely was lower than the value of the assets transferred to the partnership. The adage was: lower the value and thereby lower the tax.

Are Your Estate Plans Prepared for Digital Assets?

By Lee Poskanzer, CEO of Directive Communication Systems

The time to address digital assets as part of your client’s estate plan may have begun to run out. We’ve all heard about digital assets, cryptocurrency and occasional lawsuits by family members against social media giants like Yahoo! and Facebook. But now the topic of digital assets will necessarily have landed on your desk when you begin the estate planning process for a client.

Are you fully prepared to help your clients plan for this new asset class, and to protect yourself and your practice from doing the wrong thing?

Digital assets are the new frontier for Trust and Estates practitioners. It’s time to get up to speed about this important asset class.

For the purposes of this discussion, we will limit the focus to the most critical area of digital property: the disclosure of an account’s contents. Closing an account, removing the name from a family share plan and other “action” oriented events will be saved for another day.

Grave Robbing in the 21st Century

By Betsy Ehrenberg

In today’s increasingly connected world, identity theft has become a serious problem.

It is estimated that 17.6 million Americans are the victims of some form of identity theft every year. Of those attacks, 2.5 million happen to someone who is deceased. This means 2,200 deceased Americans will be deliberately targeted and have their identities stolen every single day. Another 1.6 million Americans will have their identities stolen by chance when fabricated Social Security numbers happen to match those belonging to deceased individuals. Identity thieves fraudulently apply for loans, drain bank accounts, acquire credit cards, and even establish cell phone plans, according to research conducted by ID Analytics. Identity theft is the 21st Century’s version of grave robbing.

When a loved one passes away, worrying about protecting their identity or erasing their electronic footprint isn’t usually a family’s top priority. On average, an American has over 150 locations where their electronic footprint resides—from credit card accounts to grocery store rewards. The electronic footprint is composed of electronic records and digital assets.

The Cobbler's Children

By Teresa L. Bush, Esq., Director of Education and Support Services, InterActive Legal

My great-grandfather emigrated to the USA as a teenager from a country that no longer exists, and was a cobbler by trade. I treasure his two iron shoe stands passed down to me, because they are symbols of one man’s hard work that laid the foundation for generations of descendants. But they also bring to mind the old saying about the cobbler’s children having no shoes.

I have no reason to think that my grandmother didn’t have shoes, but I will confess that I, as an estate planner, spent several years without an adequate estate plan of my own. It makes me wonder how many of my colleagues are in the same boat. As estate planners, we should arguably have the most up-to-date and well thought-out estate plans. If the law changes, we should change our own plans first (if necessary), and then we are better equipped to help our clients. Perhaps it’s a bit like putting on your own oxygen mask first, before you help other passengers.

Telephone Intake Scripts Decrease Fee Objections, Increase Closure Rates, and Save Hours of Time

by Candace Wells, COO and Law Business Strategist, Attorney Alchemy

You’ve probably heard that policies, procedures, systems, and processes will not only save your sanity, but also make you and your team more efficient. Maybe you even “get” it and want to document your processes, but don’t know where to start. I hear you. It can be daunting to figure out where to begin.

My recommendation? Start small. By formalizing your intake script, you can get started on documenting how things work in your firm and decrease fee objections, increase your closure rates, and save hours of your time.

Let me explain.

SSA Clarifies Sole Benefit Rule: Trustees May Breathe a Little Easier

by Elizabeth Q. Boehmcke

Practitioners who regularly work with special needs clients are probably aware that the Social Security Administration ("SSA") released revisions to the Program Operating Manual System ("POMS") on April 30, 2018.  But since many of us are still processing the revisions, I hope to highlight some of them for those of us who are between CLE sessions. 

These revisions may come as welcome news to attorneys who draft special needs trusts or advise trustees of special needs trusts.  I am unfortunately limited herein primarily to highlighting the sole benefit rule revisions.  However, there were a number of important changes and if you want more details, you may want to review the full article I drafted, which you can find here.

Waivers, Penalty Periods, and the 5 Year Lookback

Letha Sgritta McDowell, CELA, InterActive Legal

On April 17, 2018, the acting director of the Centers for Medicare and Medicaid Services issued a policy clarification to all state Medicaid Directors regarding the imposition of penalty periods for individuals requesting Home and Community Based Services. The reaction to this guidance is mixed. In some states this clarification may be beneficial to many hoping to receive services in their home, while in others, this clarification may result in further delays in obtaining home services.

Individuals requesting Medicaid assistance with the payment of their nursing care expenses must meet certain eligibility criteria, both financial and non-financial, before Medicaid will begin assistance. The non-financial criteria include US Citizenship or lawful permanent resident status, state residency, and a demonstrated need for a certain level of care. The financial criteria include meeting certain income requirements and having minimal countable assets (there is no limit on non-countable assets). In addition, if an applicant or their spouse has made any uncompensated transfers, then Medicaid will impose a penalty based on the asset transfer.