Provided by James A. Carolan, CWS®, CTFA | Sr. Estate Planning Attorney for EWM Legal Services
Every day, I see examples of “do-it-yourself” estate planning and uncoordinated estate planning, leading to problems. Each matter reads like a law school exam and reinforces why you need a team working with you to coordinate your estate, financial, and tax planning.
For example, this is a real issue that a colleague is dealing with:
In 2009 the client “Andy Bear” went to Attorney “Sally Smith” and together they created the “Andy Bear Revocable Living Trust dated January 1, 2009”. In 2013, Andy decided he needed to update his estate plan and went to see Attorney “Wally Ward.” With Wally, Andy amended his Trust by a restatement* of the January 1, 2009, Trust.
In 2016, Andy decided he wanted to change his plan again. However, he returned to Attorney Sally Smith to discuss his wanted amendment. Sally did not ask if he had done any other modifications, and Andy didn’t mention the 2013 restatement. Sally then drafted the “First Amendment to the Andy Bear Revocable Living Trust dated January 1, 2009,” using the Trust language as she drafted in 2009, changing a particular article and changing the distribution plan upon Andy’s death.
In 2018 Andy decided he wanted to change his successor Trustee designation and returned to Attorney Sally Smith. Still not aware of the 2013 restatement, Sally prepared a “Second Amendment to the Andy Bear Revocable Living Trust dated January 1, 2009.”
In 2022 the matter came back to Wally Ward for administration and settlement.
The question presented to law students – and unfortunately, in this case, in real life – “Which Trust document, and which amendments are effective?” The follow-up question is, “What is the current language of the Trust?”
Even with the restatement, it is still the “Andy Bear Revocable Living Trust dated January 1, 2009”. A restatement does not change the name of the Trust, and all the funding of the Trust remains intact. My answer to the law school question would be that the 2009 Trust has been amended three times; first in 2013, then in 2016, and then in 2018. All the amendments are effective, and the most recently dated will prevail.
To answer the follow-up question then, what is the current language of the Trust? We must start with the first amendment done in 2013 as the base. Next, we must look at the second amendment (titled the First Amendment) and see how it affected the language done in 2013. Then we must look at the third amendment done in 2018 (titled Second Amendment) and see how it affected the 2013 amendment.
Since Sally Smith did not do a restatement, likely, the amendments drafted by her do not neatly match up with the 2013 restatement articles and paragraphs. To interpret the document, we must use the legal maxim that all language must be given effect and not ignored.
Administering the Trust, therefore, means we will have to look from document to document to determine what articles and paragraphs are affected by the 2016 and 2018 amendments. The article and paragraph designations in the 2016 and 2018 amendments will be considered “scrivener error,” or the drafting attorney miscited the designations. With multiple amendments, there is a lot of flipping back and forth between the documents. If the original 2009 document is still available, it must be referred to match up the articles and sections properly; in many cases where the Trust has been restated, the original document is not available.
In short, my colleague is presented with a mess. If Andy Bear is deceased or incapacitated, time will be spent determining the exact language and intent. It will take the attorney time to determine the document’s current language. This added complexity will mean more legal expense to the estate settlement or incapacity administration. With luck, the court will not have to be involved in assisting with determining the appropriate language. However, if any beneficiary objects or inconsistencies cannot be harmonized, then court involvement to help will be necessary so the court can determine the exact language to use. If court action is required, there will be even more legal expenses and loss of control by the Trust maker.
If the Trust maker were alive and competent, there is an easy solution. My colleague only needs to restate the 2009 trust by working with Andy Bear to determine what his Trust needs to say today. That will give one document and harmonize the language with the plan again. Unfortunately, this matter came up due to the death of the Trust maker, Andy Bear, and the need to do settlement of his estate and Trust.
This is just one example for those who are new to EWM Legal Solutions and wondering why we ask for so much information. We want to see all your current documents to ensure that we achieve your goals, keep you in control, and follow your plan without undue expense or delay. It’s also why we ask if anything has changed for our returning clients. Had Sally Smith asked Andy Bear if anything had changed since they last met in 2009, she would have known of the intervening restatement by my colleague in 2013 and avoided the mess that the multiple amendments created. With that knowledge, she would likely recommend a restatement in 2016.
*A restatement, like was done in 2013 in the example, is where you use your power to amend the Trust in total and create all-new language. When asked to amend another attorney’s drafting, we typically do that because, as your new attorney, we don’t want to accept any liability for a latent defect that might be missed or created by amending one part of the Trust drafted by another attorney. Our rule at EWM Legal Solutions is to amend any trust we draft one time. If there is a second amendment to your plan, we restate it; it makes administration much easier to have one document to review and avoids any chance of internal inconsistency by multiple amendments.
Executive Wealth Management and EWM Legal Solutions are separate but affiliated companies. Executive Wealth Management (EWM) is a Registered Investment Advisor with the Securities and Exchange Commission. Reference to registration does not imply any specific level of qualification or skill. Investment Advisor Representatives of EWM offer Investment Advice and Financial Planning Services to customers located within the United States.
James A. Carolan may be reached at 248.924.3129 or email@example.com.
Executive Wealth Management and EWM Tax Solutions are separate but affiliated companies. Executive Wealth Management and EWM Legal Services are separate but affiliated companies.
Executive Wealth Management (EWM) is a Registered Investment Advisor with the Securities and Exchange Commission. Reference to registration does not imply any specific level of qualification or skill. Investment Advisor Representatives of EWM offer Investment Advice and Financial Planning Services to customers located within the United States.