By George E. Zola

Some of my colleagues are having a difficult time answering the basic question, “Who is the client?” As lawyers, we are expected to represent our clients’ interests to the exclusion of all others. This is a basic idea taught in law school. However, with the pressure of meeting billable hour requirements and generation of fees, some lawyers may need a refresher course.  Too often it appears as if lawyers are selling their clients a service or a product which will generate the greatest fee for the attorney rather than exploring less expensive alternatives which will accomplish the same objective.  When faced with doing the proper thing and placing a client’s interests above his or her personal interests, some lawyers are following the lead of some of our elected officials, and are placing their personal interests above the needs of their clients.  If a client cannot rely upon the objectivity of his advisors, he or she may be taken advantage of by someone he trusts.

There are several examples where this may apply in the estate planning area. The first is the overuse of trust agreements to avoid probate.  Some lawyers are too quick to recommend trust agreements to their clients when the use of payable on death (POD), transfer on death (TOD) or joint tenants with right of survivorship (survivorship) may be a more appropriate option because they can accomplish the same task.  The use of a trust can avoid probate and numerous other objectives. However, it should not be automatically selected.  To avoid probate, a trust must be in existence prior to the time of death and all of the individual’s assets must be re-titled into the name of the trustee.  It is desirable to avoid probate because probate is a public proceeding and anyone can go to the Probate Court and view your financial records. Re-titling your assets as POD, TOD or survivorship will also avoid probate and in most cases the estate tax consequences will be the same.  The trust option will necessitate incurring a fee to prepare the trust agreement and then some additional legal work to complete the transfer of the assets.  The other alternatives merely involve completing paperwork at the bank or brokerage firm, re-titling your automobiles with the Bureau of Motor Vehicles, and the preparation of a deed if you own real property.  The use of POD, TOD and survivorship is not a complete substitute for a trust; however, it is one which should be explored with your advisor if probate avoidance is your sole goal.

While it is true that the use of a basic trust will not save estate taxes, it is possible to draft a trust to save estate taxes if your estate is large enough.  To be subject to a federal estate tax, under current law an estate must exceed $3,500,000. Each state may impose an estate tax and your individual state laws will need to be reviewed.  For example, Ohio grants an exemption of $338,000, so if your estate is less there will be no tax even if the assets pass to an individual other than your spouse.  Both federal and all states’ estate taxes have an unlimited marital deduction, so assets passing to a surviving spouse are never subject to any estate tax.  Unfortunately, some advisors will prepare a trust which includes complicated formulas and distribution options to save estate taxes.  As you would expect, as the complications increase so does the fee. It is very aggravating when I review an estate plan for a client containing complicated estate tax provisions when the size of the estate does not warrant the sophistication.  In most instances, the documents are well drafted; however, the fee of $3,000 to $5,000 is not justified when simpler language would work.

One of the more difficult areas for attorneys to remember who the client is and to represent their wishes and intents is Medicaid planning.  Medicaid planning is completed because Medicare does not pay for nursing home care.  To qualify for Medicaid a client must divest himself of all of his or her assets and then Medicaid will pay for their nursing home care.  Divestment is completed by transferring the assets to the children and thus forcing the taxpayers to support individuals in the nursing home.

In most cases, it has been my experience that the clients (i.e. parents) do not fully understand the Medicaid planning and are going along with the plan to appease their children.  Since the parents are the clients, if they do not wish to give their assets away to qualify for government assistance they are under no obligation to do so, and the lawyer should say so.  There are cases where the parents feel pressured to comply with their children’s wishes to qualify for welfare and the lawyer or advisor is pressured into proceeding with the plan even though he or she knows that the client does not wish to pursue the plan.  To do otherwise could result in the loss of the client representation either immediately or when the client dies and the children are appointed Executor.  It should not be difficult for the lawyer to resist this pressure and he or she should aggressively represent the client’s interests and not those of the client’s children. 

If you are completing your estate plan or are seeking the advice from a legal professional and you have any concerns or do not understand the plan, you need to ask questions until you are completely comfortable with the plan.  You should not be afraid to ask if there are other less expensive alternatives which can be substituted.  You need to have complete faith and trust in your advisors.  If it is lacking, then you need to seek new advisors. Unfortunately, sometimes it may be necessary to remind the lawyer of his or her duty to represent your interests and for you to provide them a gentle reminder of “just who is the client?”