Excerpted from The Biggest Legal Mistakes Physicians Make: And How to Avoid Them
Edited by Steven Babitsky, Esq. and James J. Mangraviti, Esq. (©2005 SEAK, Inc.)
Download Free 646 Page E-book: The Biggest Legal Mistakes Physicians Make and How to Avoid Them
Executive Summary
Physicians need to respect the board-certified estate planning lawyer as a specialist. Proper estate planning should always be viewed as a process and not just as an event. Physicians need to find board-certified estate planning lawyers who are the best and most experienced. Finally, it is important for physicians to abide by the client protocols established by their estate planning attorney.
Mistake 1 Failing to Seek Out an Estate Planning Specialist
In the field of medicine, the age of specialization is many decades old. A family practitioner would not think of referring a patient with a cardiac problem to a hand surgeon. The standard of care requires that a patient with a specific health problem be referred to a physician who specializes in that particular health matter. Why then would a physician ever want to visit a general practice lawyer or a trial lawyer for his or her estate planning needs? The age of legal specialization is only about 30 years old. To protect the public, many state bar associations have adopted a system for the board certification of lawyers, and these associations are usually glad to provide the names, addresses, and telephone numbers of board-certified lawyers in a particular geographic location.
Action Step Physicians should call their state or local bar association or seek a referral for the names, addresses, and telephone numbers of lawyers who are board certified in estate planning.
Mistake 2 Hiring the Cheapest Estate Planning Specialist
Many physicians spend exorbitant amounts of money for tangible possessions, such as cars. Likewise, they spend thousands on dubious tax schemes thinking their income tax will be reduced. However, when it comes to protecting their entire accumulated and future wealth from lawsuits, estate taxes, and probate, most physicians do not hire an estate planning lawyer with the proper qualifications but prefer instead to search for the “best deal out there.” John Ruskin, a 19th century art critic, was famous for the following quote:
“It is unwise to pay too much, but it is worse to pay too little. When you pay too much, you lose a little money; that is all. But when you pay too little, you stand to lose everything, because the thing you bought was incapable of doing the thing it was bought to do. The common law of business prohibits paying a little and getting a lot; it can’t be done. If you deal with the lowest bidder, it is well to add something for the risk you run, and if you can do that, you will have enough to pay for something better.”
Physicians should follow the example of their patients when it comes to finding a doctor. In their search for a good doctor, they do not go looking for the cheapest doctor. They look for a referral to the best doctor to treat their particular medical problem. When it comes to their health, expertise takes precedence over expense. They want the most experienced doctor, and money is no object. To protect their wealth, doctors would be so wise to find the best lawyer and not the cheapest. If physicians select the lowest bidder for their estate planning purposes, they should ask themselves, why is this lawyer so cheap? Will this lawyer cut corners that could mean losing wealth to taxes, probate, or judgment creditors?
Action Step Physicians should seek out a board-certified lawyer who is the best and most experienced and not necessarily the cheapest.
Mistake 3 Believing That Estate Planning Can Be Completed with a Generic Document
Occasionally, physicians ask how much it costs for a simple will or a simple living trust. The caller is really shopping for the cheapest lawyer and not for a simple estate plan. As an attorney who is board certified in estate planning, probate law, and tax law, I tell these callers that I feel I would be violating the standard of care by doing a simple will or trust instead of a customized, comprehensive estate plan. The usual response from the caller is, “Don’t you already have standard estate planning documents stored in your computer?” Although I have stored on my computer thousands of estate planning document templates that I have developed over 30 years of practice, until I can ascertain the caller’s needs and desires, I have no idea which template is right for the caller. Estate planning is not a commodity. The documents produced for clients are the result of many hours of discussions about their estate planning goals, which involves exploring their hopes, fears, dreams, values, needs, and desires. Together, the attorney and the client plan their estates for the client and for their loved ones. The analogy of building a custom home applies here. Before a custom homebuilder quotes a fee, the builder would need to spend several hours with the client to discover exactly what kind of home the client desires. Just as one house plan does not fit everyone’s needs, no basic simple will or simple living trust does so either. Brick by brick, hope by hope, dream by dream is how a good estate planning lawyer builds customized estate plans.
Action Step Physicians need to respect the board-certified lawyer as a specialist who customizes their documents.
Mistake 4 Trying to Do Estate Planning Without Help
Physicians sometimes find estate planning documents on the Internet or create their own documents and then call an attorney to review these documents for an hourly fee. Legal documents are tools that require a specialist who knows how to use them, and physicians can make a mess of their estate using such boilerplate documents. I respond to such callers by saying that I charge $1,000 per hour to review their estate plan and require a three-hour minimum retainer. These professional fees are based on numerous years of experience and level of expertise. Quality service produces a quality product.
Action Step Physicians need to respect the board-certified lawyer as a specialist and not try to do their estate planning themselves. Physicians need to understand the old computer cliché “garbage in-garbage out” also works in reverse when pulling documents off the Internet: “garbage out-garbage in.”
Mistake 5 Failing to Include the Opinions of a Spouse or Others in Estate Planning
Sometimes a physician shows up at my office without his or her spouse. When this happens, it is usually the husband who comes in without his wife. The first question I usually ask is: “Will I be creating only your estate plan?” Predictably, he will try to convince me that he has the authority to speak for his wife and that she will do whatever he tells her. My second question is then to ask if his wife believes that estate planning is so unimportant that her input toward the design and creation process is either not needed or not desired. If this question does not convince him to include her in the estate planning process, I usually refuse to plan the estate with only one of the spouses present. I refer to these husbands as estate planning lone rangers. However, I will plan an estate for that spouse if the other spouse is so ill that he or she cannot participate in the design and creation process.
Estate planning lone rangers usually fail to understand that while the husband may be the chief financial officer of the family wealth, the wife is usually the chief emotional officer of the family. It has been my experience that whenever I made the mistake of estate planning with an estate planning lone ranger I usually ended up doing the estate plan twice. This is because when the wife finally does come into my office to review the first estate plan, several problems inevitably are discovered. For example, the spelling of the names and/or the dates of birth of one or more of the children are incorrect or the persons named as executors, trustees, or guardians of the minor children will not be to her liking. Worst of all, she quite understandably feels that the husband and I have conspired against her in designing and creating a plan that did not include any of her input, and she will rightfully refuse to sign anything that did not include her input. It is therefore my policy that when an estate planning lone ranger shows up at my office I give him one of two choices: either we postpone the meeting until a later date, when the wife can be present, or he will have to immediately write me a check for $500 for the consultation. If he does want to engage my services, I let him know that I will be charging him twice the fee that I normally charge, because I will, more likely than not, have to design and create the estate plan a second time.
If a physician is not married or is a widow or widower, he or she should consider including a significant family member or friend, such as a trusted adult child, in the estate planning design and creation process. This is especially true if this trusted relative or friend is someone the physician usually consults with before making important decisions. By including this trusted person in the process, he or she will be privy to the attorney’s explanation of the estate planning designing and creation concepts, instead of to the physician’s second-hand explanation. Just as physicians are much better at explaining medical matters to patients and family members, attorneys and financial advisers are much better at explaining estate and financial matters to clients and family members.
Action Step A happily married physician should always include the spouse in the estate planning design and creation process. An unmarried physician should always include a trusted family member or friend in the estate planning design and creation process.
Mistake 6 Failing to Disclose All Assets and Personal Information
Some physicians mistakenly believe that by disclosing all of their assets to their estate planning or financial advisers they will be compromising their privacy or that their advisers will charge them higher fees. Additionally, some physicians may be embarrassed to disclose some vital personal information about themselves or their family, such as a divorce or the existence of a child with a mental, a physical, or an addictive handicap. They might even want to hide the existence of a child who has a criminal record or has been convicted of a crime and served time in prison. What they do not realize is that by withholding vital financial or personal information, they will disempower their advisers, meaning their advisers will not be able to make a proper diagnosis of their planning needs and desires. Furthermore, their advisers will not be able to prescribe appropriate estate planning tools and alternatives. Just as in medicine, if a patient fails to disclose vital information or symptoms, the physician will not be able to make the proper diagnosis or write the proper prescription.
Physicians who believe that certain sensitive financial or personal information needs to be kept private should tell the estate planning attorney that they want this information kept private under the attorney-client privilege and not to disclose this sensitive information to other non attorney financial advisers.
On the other hand, physicians should seriously consider waiving the attorney-client privilege regarding non sensitive financial or personal information so that their attorney may share this information with their other non attorney financial advisers for the benefit of the physicians and their family. It is always advisable for the client and the attorney to include the client’s other financial advisers, such as a certified public accountant and/or financial planner, in the estate planning design and creation process. If, however, it is not possible or practical to include one or more of the other advisers in the process, then the physician needs to give the attorney permission to disclose and explain the estate plan to the other advisers. This is especially important in regard to tax information that needs to be disclosed to the CPA so that the CPA can prepare the proper income, estate, or gift tax returns.
Action Step Physicians should always disclose all vital financial and personal information to their attorney. They need to inform the attorney to keep all sensitive information confidential under the attorney-client privilege. All other non confidential information should be disclosed to a physician’s other advisers, such as a CPA or a financial planner. It is also a good idea for the physician to disclose any information that he or she may feel is not important or vital and let the attorney decide what is important.
Mistake 7 Failing to Follow the Attorney’s Client Protocols
In some practices, prospective clients must complete certain questionnaires and return them to the estate planning attorney before the attorney will schedule a consultation with the prospective client and his or her spouse or other helpful decision maker. Estate planning attorneys need this information to evaluate whether the prospective client is suitable for the services they provide. In addition, it is a waste of time to drag out this information during an initial consultation. Physicians should understand these protocol requirements. Physicians require new patients to come into their office at least 30 minutes before their first appointment because patients typically need to complete forms and other paperwork.
In my practice, I explain to prospective clients that if they fully comply with all of these protocols, there is no charge for the first hour. After the first hour, I usually quote a fee range (not an exact fee) for the planning, and they can choose to move ahead with the planning or not. If they choose not to proceed, we end the meeting and there is no charge. If we move on to the second hour and they do not engage my services, there is a fee of $250 per hour after the first hour. If the prospective client tells me that he or she does not want to comply with my protocol but just wants to meet me first, I charge a $500 advanced payment to set such an appointment on my calendar. Experience has shown that clients who do not want to complete my protocols are either going to be difficult to deal with, will waste my time because they are shopping for a cheap lawyer, or are not serious about completing their planning.
Action Step Physicians need to fully comply with the attorney’s protocols the same way they expect patients to comply with their protocols.
Mistake 8 Failing to Include All Advisers in the Estate Planning Process
I regularly suggest to my physician clients that we consider inviting their CPA and financial adviser to participate in the plan design process. These other advisers are familiar with the client’s financial matters and can contribute valued information and suggestions. In addition, by having them included in the plan design process, the advisers will be fully informed for the planning implementation process.
Action Step Physicians should include their other advisers early in the plan design process.
Mistake 9 Ignoring Communication From the Attorney and Failing to Follow Up With Periodic Checkups
Proper estate planning should always be viewed as a process and not as an event. Just as planning for good health is a lifelong process, planning for good wealth is also a lifelong process. After an estate planning vehicle, such as a living trust or a family limited partnership, has been created, the vehicle will need fuel to work. This fuel is the various owned assets that must be retitled into the name of the vehicle. It has been my experience that after the estate plan is created many physicians fail to provide the attorney with the proper documentation to transfer title to their assets into the vehicle. Many times, I have to send two or three follow-up letters to get all the necessary information. Furthermore, over time, as laws change or needs and desires change, I will send several letters to the physician informing him or her to review the plan design in light of these changes. The estate plan funding also must be checked to ensure that all preplanning assets were properly put into the vehicle and that all subsequently acquired assets have been properly acquired in the name of the vehicle. It is critical that these things be done once an estate plan has been created.
Action Step Physicians need to promptly respond to communications from their estate planning lawyer in regard to the funding and updating of estate plans. Physicians need to recognize that proper estate planning should always be viewed as a process and not just as an event.
Mistake 10 Failing to Get a Second Opinion on the Old Planning
Many times when I meet physicians in a social setting I ask them if they have accomplished their asset protection estate planning. Whenever they tell me “Yes,” my next question to them is, “How long ago did you get the planning done?” I usually find that it has been five to 10 years ago. Often it is not the physicians’ fault that their planning is out of date, but rather the fault of their estate planning attorney who has simply not followed up on the physician’s planning over the years. Most estate planning lawyers prefer to do planning for new clients rather than following up on previous clients. I usually ask the physicians if they would like to have a free second opinion on their old plan. I have rarely found an old plan that did not need some improving.
Action Step Physicians need to keep their estate plans current and remember that estate planning is a process and not an event. If their original lawyer does not follow up on their planning, they need to visit another lawyer and get a second opinion on their plans.
Conclusion
Physicians need to respect the board-certified estate planning attorney as an expert and understand that proper estate planning is a process and not just an event. Complying with the attorney’s protocols increases the likelihood that not only will proper estate planning get accomplished but also a great attorney-client relationship will be established.
Additional Resources
- Esperti and R. Peterson, Creating a Loving Trust Practice (LTES, Inc. 1991)
- Esperti, R. Peterson, and P. Parenti, Generations: Planning Your Legacy (Esperti Peterson Institute 1999)
- Esperti, Peterson, and Parenti, Legacy: Plan, Protect & Preserve Your Estate (The Institute, Inc. 1996)
Written by:
Peter J. Parenti, JD, LLM
Peer reviewed by:
Malia Ann Ploetz, Esq.