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MY
PRACTICE PHILOSOPHY
By: Michael E. Thomas
My approach to estate planning has changed dramatically recently and is
different from the average attorney in this area. The purpose of this
paper is to explain my philosophy and why it is best for the client and
best for the advisor whether a broker, agent, or CPA. I will explain first
how I handle the client, next how I design the plan, and finally how I
follow up. Hopefully, you will see the benefits to my approach, recognize
how it sets me apart from other estate planning attorneys.
Pre-interview
When a client calls for an appointment, he or she is sent a detailed checklist
to fill out and bring in to the appointment. The information is reviewed
with me, I devise an estate plan, and the client is assigned to the counselor
who can best serve that client's needs, which might be me. I see every
client, but I will not meet the second time with every client. I have
come to realize that I cannot help everyone who calls. I do, however,
want every client to receive the treatment he or she deserves. My practice
is based on ministry-not money. So each client is treated with equal dignity
regardless of economics.
With the repeal of the estate tax some clients are wondering what to do
about estate planning. I tell the client that tax considerations are the
least important thing to him or her and then I explain why. Every client
agrees with me.
Client Interview
The first hour or so, I spend asking detailed questions about the family,
the relationships with kids, in-laws, grandkids, or others. I ask about
how the various family members handle money. I ask about the strength
of the marriages. I ask about drug problems, disabilities, and sibling
rivalries. These are issues that must be addressed if I am going to really
help the clients. I must know about the family before I can address assets.
The first thing I teach the clients is that estate planning has only a
little to do with taxes. I ask the clients a series of questions to prove
to them that tax avoidance is their smallest priority. Here are the questions
I ask as I explain what the law does if the client has no plan.
1. Control of Assets
"If you could give up control of your assets and let the government
control them and avoid tax, would you do that?"
2. Control if Disabled
I then explain to them how the probate court is involved if either of
them is disabled and ask, "If you could control what happens to your
assets (privately) if you are disabled, but pay some estate tax, or if
you could let the court handle everything as a public record, but pay
no tax which would you choose?"
3. Control After Death
I tell the clients what happens to their assets at death. If they have
children who have shaky marriages, bad spending habits, drug or alcohol
problems, or a disability, they may not want to pass assets to them outright.
I ask, "If you could exercise some control after death in order to
protect assets, but pay some taxes, or have no control and pay no taxes,
which would you choose?"
4. Asset Protection
I inform the husband that if he dies and leaves everything to his wife,
ALL investment assets, the cottage, etc. will be subject to a lawsuit.
So if she should have an unfortunate car accident and a couple of people
are killed, she could be effectively wiped out. "If you could protect
assets for your spouse from all lawsuits and pay some estate tax, or you
could leave the assets open to lawsuit and avoid tax, which would you
choose?"
5. Remarriage Protection
I next explain that if husband dies and wife remarries, wife does a new
will leaving the new husband nothing, and wife then dies, that the state
says the new husband can elect against the will and take $55,000, $17,000
homestead allowance, $11,000 personal property allowance, up to $20,000
living allowance, and 25% of the balance. I further explain that if the
couple has a trust, I have seen the new spouse, over the years, end up
with most of the trust assets in joint name, so little passes to the kids.
"If you could absolutely protect your assets from intrusion by a
new spouse, and pay some tax, or have no protection and pay no tax, which
would you choose?"
As you might guess, the clients always choose to pay the tax. I tell the
clients that even if federal estate tax is repealed, they have told me
they need planning. I also tell them that we can offer all of the protections
and avoid federal estate tax.
The Design
The next phase of the interview is the design phase. I am careful to tell
the clients that I do not charge for documents. I charge for design. The
design phase is another area where I am different for a number of reasons.
First of all, my disability provisions offer the clients the opportunity
to design a panel to determine they are disabled, and give specific- instructions
for who receives help if the client is disabled and who manages money.
I include disappearance as establishing disability, which allows the family
to access the trust if we are waiting for a 5 to 7 year statute to run
before we can declare a person dead.
I design the marital and family trust so that both trusts are protected
from lawsuit after the death of the first spouse.
I have a special remarriage provision that allows payments upon remarriage
only if the surviving spouse's estate is protected by a prenuptial agreement.
That makes it difficult for a new spouse to take assets intended for the
children or grandchildren. I have not seen that provision in other trusts.
I include
for the children's protection specially drafted drug, alcohol, and gambling
provisions to protect trust assets against the possibility of a child
or grandchild suffering an addiction. I include disability provisions
that protect assets if a beneficiary should be unexpectedly disabled.
I include an option for a convenience-protective trust for each beneficiary.
After a predetermined age the beneficiary's assets are not distributed,
but remain in trust. The beneficiary and a third party are named trustees
of the beneficiary's share, and the beneficiary is given free access to
the trust, except for creditors. If a creditor (or a divorcing spouse)
attack the trust, the third party has no discretion to distribute funds
to the creditor. So the beneficiary enjoys some creditor protection for
life. I have not seen this provision widely offered.
I also instruct
the clients (and brokers, agents, or CPAs) in elections and beneficiary
designations to allow the qualified benefits to pass to children or grandchildren
without immediate income taxation.
I give the
clients a personal legacy questionnaire if they desire to pursue it. I
ask the clients if they would like to leave their children a letter outlining
their value system and reminding the children of memorable events in their
relationships. This letter will be presented to the children after death.
I give them a copyrighted questionnaire. They fill it out and I send it
in and a Personal Legacy Declaration is sent to me along with a computer
disk to expand upon it. Some clients are thrilled about this.
I also tell
the clients that I will take their medical powers of attorney and enroll
the clients in DOCUBANK®. This is a company who electronically copies
the POA and a list of contact persons and sends the client a plastic card
with his name, a file number and instructions. If the client is hospitalized
anywhere, at anytime day or night, the hospital can call the 800 number
on the card and punch in the file number and the hospital fax number.
The power of attorney and the contact list will be faxed to the hospital.
I know of no one in this area offering this service. The cost is about
the cost of a safe deposit box. My clients pay about half price, unless
they are on my Estate Plan Maintenance System, (explained below) and then
I pay for them.
This interview process takes perhaps two hours. I explain to the clients
that this design is more in depth than a standard interview followed by
document preparation. Thus they will get a plan designed for the specific
needs of their family. The fees will be more than they would pay for standard,
one-size-fits-all trusts. My fee structure for this planning is between
$2000 and $5000, depending on the needs of the client. The question is
simply whether they see value here or not.
Most of my clients are grateful for the extensive amount of time I take
with them and the commitment I require from them. Some are looking for
the cheapest thing they can find. They do not become clients.
Keep in mind that clients with smaller estates will not pursue some of
the options I have mentioned above and will be charged significantly less.
They will be given some op 'ons suc as protection and remarriage protection.
At all times fees will be adjusted if a client has a need and limited
resources. Ministers and those in vocational ministry are only charged
a nominal fee.
Funding
and Follow-up
I am particularly sensitive to widows coming in to see me. I have completed
over 7000 trusts in 20 years or so, and I have widows coming in every
month now. My standard procedure is to place the widow on my widow's prayer
list for one year and try and be a support for her. In fact, the first
thing I do is pray for her in my office. Then I begin to inquire about
assets. Invariably, the widow does not know where everything is, has forgotten
how the trust is supposed to work, has failed to place the assets all
in trust, or has taken some action (either by herself or through her advisor)
which is to the detriment of the plan. I leave the widow frustrated and
upset because of all that she has to do for me while she is in a state
of mind where she cannot reason clearly. That situation had to stop.
I have a service available to the client in which all of the transfers
are made and all beneficiaries are changed for the client and an inventory
list is completed for the client, the advisor and me. The important thing
here is that the client gets a list of all the assets and I have the assurance
the trust is properly funded. There is a cost for this service.
Next, I offer the client the opportunity to be enrolled in one of several
maintenance plans. These are follow-up plans which involve at least annual
reviews of all of the assets to assure they are all where they should
be and assure that there is no additional planning needed. If there is,
the advisor is notified. I expect many clients will want to meet annually
or biannually, in which case the advisor is involved, as are the children.
In this manner, the whole family knows the plan (no surprises-no disagreements)
and the advisor establishes a relationship with the children. This also
includes free phone consultations and a monthly newsletter.
Nursing Home Issues
Nursing home costs concern many people. I have a staff that includes two
retired Medicaid review specialists. We can shelter assets so they are
not totally depleted on nursing home expenses, even if the person is already
in a nursing home. We can also factor that planning into estate plans
for my elderly clients.
As a member of the Michigan Forum of Estate Planning Attorneys, the WEALTHCOUNSEL
national study group, and the National Academy of Elder Law Attorneys,
I have about one thousand attorneys with whom to counsel, and who will
help me stay on the cutting edge of estate planning.
Conclusion
This epistle is intended to inform you as to what sets me apart from others
in my field, and why my fee structure may differ from others. If you have
questions, please feel free to contact me at one of the venues below.
Michael E. Thomas
5206 Gateway Centre, Suite 200
Flint, M1 48507
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810-235-6238
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