Taxation & Estate Planning

A Late Reply To Jamie Johnson: Thoughts On Probate Disputes

By Joel A. Schoenmeyer

I just stumbled upon this short Vanity Fair article by Jamie Johnson. In it, Johnson (a filmmaker, and one of the Johnson & Johnson heirs) uses the movie The Art of the Steal (which I discussed here) as a jumping-off point to discuss (among other things) estate planning and probate attorneys.

His title - "The Art of Stealing from the Rich and Dead" - is pretty provocative. Here's a passage:

Examples of glaringly manipulative, and sometimes unlawful, interpretations of high-profile wills are surprisingly common among wealthy Americans. Contrary to what most people might believe, the rich routinely fail to draft effective trust agreements that faithfully carry out their dying wishes. In fact, power struggles over inherited wealth are so endemic in the culture of affluence that nearly all of the nation?s most profitable law firms maintain trust-and-estates divisions whose sole purpose is to handle such disputes?and reap the financial rewards.

Historically, the leaders of vastly rich families have gone so far as to reserve six percent of their fortunes for payments to long-suffering estate lawyers. Problems of this nature occur so regularly that attending to them becomes practically a permanent job.

Disagreements often result from trust and will documents that can never be specific enough. Products of a particular moment, such documents cannot anticipate future developments, so, while people and financial institutions grow and change, charters do not. Conflicts inevitably arise, and opportunities for manipulative, even illegal, behavior emerge.

Executors of wills and others entrusted with managing supposedly irrevocable trust agreements can seize the chance to alter events in their own favor.

I think Mr. Johnson makes some good points, both here and when he talks about the difficulties in controlling your bequests from "beyond the grave." But I would disagree with him about the most profitable law firms "maintain[ing] trust-and-estates divisions whose sole purpose is to handle [probate] disputes." I was an associate in the trusts and estates department at the firm now known as Sidley Austin LLP, and our department was both small, and not-at-all focused on trusts and estates litigation. There were something like 15 T&E attorneys in the Chicago office -- out of perhaps 300 attorneys total there -- and only two of us had much to do with litigation. To the extent that T&E departments are profitable (and I doubt they are, at least when compared to regular litigation and corporate departments - that's why T&E attorneys are greated like second-class citizens), it's mostly because of sophisticated (estate) tax planning work. That was really our department's bread and butter.

I've never heard of the 6% "rule," and it doesn't make much sense -- probate attorneys are generally paid out of the estate's assets, not from some segregated fund.

Mr. Johnson is touching on something when he mentions that documents can never be "specific enough." I remember hearing that one prominent Chicago probate litigator proudly stated he could find an ambiguity in ANY estate planning document. That's unfortunate. A lot of big-money disputes arise and continue because the players have the money to go forward. I now handle estates of all sizes, and in cases where there's not a lot of money, the parties often have to settle. They just can't afford their "day in court."

I like to think that estate planning and probate attorneys try our best to serve our clients. Maybe I'm being overly defensive here, but Mr. Johnson seems to be implying that the probate attorneys (rather than their clients) are driving the litigation. That hasn't been my experience. I think most probate litigators try to work out family disputes in an efficient manner, if at all possible. But we represent clients who often get very emotional about these issues. Probate is personal in a way that a lawsuit between, say, AT&T and Verizon wouldn't be. And there often are real problems that must be dealt with (like executors and trustees who act in illegal and/or unethical ways).

Full post as published by Death and Taxes Blog on June 10, 2010 (boomark / email).