Do-it-Yourselfers

I met with a guy yesterday who was a little too much of a do-it-yourselfer and a know-it-all for my liking. Dude, Home Depot is the place for do-it-yourselfers... not my law office! Dude is the "family CPA" for some in-laws. This might turn too technical for some but it has to be said because this guy, I met with today, is dangerous!

Let me start by saying the dude is smart (not as smart as thinks he is but smarter than average), knows his numbers and has an above average grasp of simple estate planning. However, it could be argued that some estate planning attorneys have a very good grasp on taxes. In fact, one of my partners is a CPA and the other has a tax masters; BOTH have been certified as specialists in taxation law by the State Bar. Do we do our own taxes? NO. We do legal work and we hire a CPA to do our taxes (sorry D-Smooth, they hired some chick before I became a partner).

Let me give some background.... Guy is an in-law to a family with some money. Insert joke here about marrying well! He acknowledged that 1/2 of his time is spent on the "family business" and the family only has $8m. I say "only" because I have a fair number of clients with $8mil and most do not have a 1/2 time CPA working for them. In this case he has created almost 20 different entities needing tax returns and is now working on the family estate plan as if it's the biggest estate in the world. Dude is on his SECOND round of interviewing attorneys. The first round produced an attorney who was "too close" geographically so "word might get out" about their wealth, a second attorney who was at too big a firm and (my favorite) a sole practitioner who is to small to deal with the complexity of issues that are involved.

Dude, let me enlighten you... your shit is EASY, plain f'ing vanilla, EVERYday stuff. Get over yourself.

So, he came in with his agenda for our meeting, a spreadsheet (f'ing CPA's and their spreadsheets) of assets and liabilities, and a plan for distribution... AFTER the first death. Ok, it gets technical here so bear with me.... Many trusts provide for a split into two pots (or even 3 or more) after the first death between husband and wife. This is very standard planning. The trusts are "funded" after one spouse dies. This brainiac comes in with his plan that "took months to put together" for AFTER one spouse dies and they haven't even died yet. Provides for which asset goes to the survivor's trust (A share) and which goes to the marital trust (B share). There is a lot of separate property so the plan is based on the one spouse dying first. The plan is extremely specific on which assets go to which trust after the first death.

Ok, I am thinking as I peruse his spread sheets... husband must be 85 or 90 and on his death bed, right? NO. Turns out the dude is in his 50's and his broad is in her 40's. In my world people in their 50's are really f'ing young so planning like this for after death is ludicrous. Reminds me of this trust I saw a few years ago (thank god nobody I knew wrote it) which said in short: son gets house in Carmel and daughter gets house in Carmichael. At the time the trust was written, 19 seventy-something, the houses were of similar value. Fast forward 20 years and the only similarity is that they both start with "Carm" but after that the similarities ended. One house is worth $3.5mil and one is worth $550k. That is called BAD estate planning; bordering on malpractice! When my clients want to get specific I give them about 5 different CYA letters and tell them orally about 10 more times what a bad idea there plan is. I exaggerate but only slightly.

Oh ya, and they want to gift a $3mil business interest to two kids who are under 25 years old. I asked who was taking care of the family partnership, discount valuation and gifting. He assured me they had that under control themselves. Oh great, home made family limited partnerships! That's smart since the IRS is only breaking those f'ers up every other day of the week for not being set up right! You sure about that Mr. Know it All?

Ok, so Mr. Know It All tells me all this and says "how much for the trust?" I say "which trust? The irrevocable trust to hold the FLP interests for the young kids? [insert blank client stare here] Or the ABC trust that becomes irrevocable to protect the assets for the kids ["What's the C for?"] Or have you thought about a QPRT to move the house out of the estate? Or what about a life insurance trust to hold some insurance?" [More blank stares here....] The bottom line they have a great estate to do some sophisticated estate planning and have the opportunity to set up millions of dollars into actual creditor protected trusts which is very hard to do. However, he knows more than me so his ears were closed as I explained all the benefits of my ideas.

I apparently hit on a nerve center for this guy... life insurance. He got pretty fired up about it. He told me, "I just don't like life insurance and can't understand why people have it." I explained the need to provide for the wife, young kids, liquidity to pay estate taxes AND that the shit is tax free if owned properly. He told me he couldn't understand why the family spends $10,000 a year on life insurance but if it makes them feel good he won't change it. Funny as I have clients that spend $10,000 a month on life insurance! He told me he does the simple equation of cost v. benefit and the cost is too high. That sounded like a simplistic formula by Louis Farakhan or someone else who doesn't think through their thoughts. I remember one time I stumbled across Farakhan yapping away on the TV. His theory was a) a lot of slaves came from Brazil, b) there were Jews in Brazil SO c) the Jews are responsible for slavery. That's about the kind of well developed theorem Mr. Know-it-All proposed. Lucky I don't sell life insurance as I probably would have hit the guy over the head with a 2 x 4 he was so frustrating. People in the insurance industry complain about attorneys, and more so CPA's, for poo-pooing their big sales; this guy was a major poo-pooer.

In the end I gave him a very fair fee estimate for the work he wants done but clearly advised him that is not adequate planning giving how young the clients are, how young the kids are, how their estate is likely to continue to grow as the client obviously is a good business man, and how we have no clue on earth what the estate tax rates will be.

I am modestly curious if he calls back....

Peace