Did I Get Duped on a Credit Shelter Trust?

[Midpack]

Just complete our trust and although it's way too many pages, we're generally pleased. However, when the estate attorney told us about establishing a Credit Shelter Trust upon the death of the first spouse, it made sense to us. He told us he could add that feature for $1000.

Now that we have the actual executed docs, the Credit Shelter Trust is one relatively simple page. For $1000?

Did we get duped, or is there some other background work he will have to do up front on our behalf to enable a Credit Shelter Trust.

I am even wondering if anyone can elect to establish a Credit Shelter Trust without an mention in the Trust docs...

 

[wolf]

Don't know if you were duped. I've found attorneys to be to expensive for simply filing out forms. They put everything in "legallize", instead of plain english.

So, we are stuck, and have to use them for "peace of mind". IMHO.

 

[njhowie]

They have most all documents already in a computer/program and when you come along all they do is make a copy, fill in the blanks and adjust anything which is specific to your situation.

Remember, attorneys are salespeople looking to make a buck, just like everyone else. No doubt you will observe moral hazard.

 

[Midpack]

They have most all documents already in a computer/program and when you come along all they do is make a copy, fill in the blanks and adjust anything which is specific to your situation.

Remember, attorneys are salespeople looking to make a buck, just like everyone else. No doubt you will observe moral hazard.

I realize every trust done by our attorney is at least 90% exactly the same as every other trust he does with just certain personal modifications. But that's OK with me as it would cost WAY more if he actually drafted a trust for every single client - that wouldn't make any sense anyway. The commonality also reassures us that trusts he writes are legally sound because others before us have been executed (deceased clients) without issue.

But I think I paid an extra $1000 for one page, Credit Shelter Trust, that's 100% boilerplate...

 

[Jerry1]

I don’t know what a credit trust is, but maybe if you look at the value of that piece of paper instead of the work that went into completing it. If you didn’t have that credit trust, could you or your heirs be out a lot of money? In that case, you paid for advice more so than time and materials. They call that value billing. It reflects their knowledge brought to the table, more so than the time it involved.

 

[skipro33]

In general, a trust written up by an attorney in your state will be backing up what they wrote if contested in court. Every state's laws are different when it comes to trusts and even to the point of the definition of words or terms. For example, mine stipulates that my estate goes to my children and that children are defined as progeny from a lawful marriage. No surprise 'love child' from some girlfriend from 50 years ago making claim against my estate as a potential child. Goes for grand children as well.
There are other examples, but when dealing with the legal world, it's best to have a pro who knows the terminology and definitions writing the script that is your trust.
Same with my living will. The lawyer talked with me and asked me in layman's terms the conditions I would want medical treatment if I can't express them for myself. When I was called to come in to sign, reading over, I'd never have recognized what the words were actually saying in their legalize phrasing.

 

[Lewis Clark]

Depends on the alternatives.

Does anyone have experience with DIY tools such as LegalZoom? Do these other tools stand up in court? Do attorneys really add value in situations that require little more than filling in standard templates?

 

[OldShooter]

I had never heard the term "Credit Shelter Trust" but I did remember that our estate plan had something that sounded similar. So I consulted my local trusts & estates expert, DW. Yes, that's exactly what we have. The word "credit" refers to estate tax credit and her short explanation was that it's an estate tax minimization tool, in our plan because our state is much greedier than the feds. It's not an add-on or an option in our case; it's just part of the standard package.

But two things come to mind: If you're unhappy or confused about the substance cost, you should ask the attorney. $1K to poop a fairly standard document out of a word processor does seem excessive. If you don't feel you can ask or, more generally, you don't trust the attorney then you need to find a different attorney for your estate work going forward. Vote with your feet.

 

[OldShooter]

Depends on the alternatives.

Does anyone have experience with DIY tools such as LegalZoom? Do these other tools stand up in court? Do attorneys really add value in situations that require little more than filling in standard templates?

The nice thing about estate plans is that if yours is screwed up, you won't be alive to obsess over it. Bad screwups get corrected by judges and piles of legal fees.

 

[JustCurious]

I realize every trust done by our attorney is at least 90% exactly the same as every other trust he does with just certain personal modifications. But that's OK with me as it would cost WAY more if he actually drafted a trust for every single client - that wouldn't make any sense anyway. The commonality also reassures us that trusts he writes are legally sound because others before us have been executed (deceased clients) without issue.

Exactly. Do you really want your attorney to start from scratch everytime he creates a document? I've never understood this criticism...I would not want my attorney to start from scratch when preparing documents on my behalf, I am paying for his knowledge and expertise and for how much that went into creating that form document in the first place.

 

[Midpack]

I had never heard the term "Credit Shelter Trust" but I did remember that our estate plan had something that sounded similar. So I consulted my local trusts & estates expert, DW. Yes, that's exactly what we have. The word "credit" refers to estate tax credit and her short explanation was that it's an estate tax minimization tool, in our plan because our state is much greedier than the feds. It's not an add-on or an option in our case; it's just part of the standard package.

But two things come to mind: If you're unhappy or confused about the substance cost, you should ask the attorney. $1K to poop a fairly standard document out of a word processor does seem excessive. If you don't feel you can ask or, more generally, you don't trust the attorney then you need to find a different attorney for your estate work going forward. Vote with your feet.

We have a Q&A session with our estate attorney tomorrow and I will ask about it. We're well past the going with a different attorney route, and we're pleased overall. Just wondering if we got duped on the $1000 Credit Shelter Trust. We want the feature, but it's one page, and I'm not sure it's not something we could just do when the first spouse dies without any mention in the main trust doc. Just trying to learn after the fact as I am sure we'll have one or more amendments in the decades ahead.

 

[Dash man]

We have a Q&A session with our estate attorney tomorrow and I will ask about it. We're well past the going with a different attorney route, and we're pleased overall. Just wondering if we got duped on the $1000 Credit Shelter Trust. We want the feature, but it's one page, and I'm not sure it's not something we could just do when the first spouse dies without any mention in the main trust doc. Just trying to learn after the fact as I am sure we'll have one or more amendments in the decades ahead.

Here’s an article on Fidelity that explains a CST:

https://www.fidelity.com/viewpoints/wealth-management/insights/credit-shelter-trusts

We briefly discussed this with our attorney and decided it wasn’t for us. Tax returns must be filed and there are limitations on what the surviving spouse can do with the assets.
We did set up IRA Inheritance Trusts which will allow for continued credit protection for all IRA assets after distribution.

 

[JoeWras]

I wouldn't worry too much about "one page." It is the skill of the attorney.

My siblings and I got charged $350 when I called Dad's attorney after his passing and asked a few questions. 10 minute call. No pages. Just advice, which was, "You don't need to do anything except go to the county office and file the will. Since it is a trust, you are done. Didn't I make that clear earlier?"

No he didn't. We were grieving and in shock. $350, please.

 

[OldShooter]

I wouldn't worry too much about "one page." It is the skill of the attorney. ...

True enough, but we are not talking abuot a document where adapting to the client requires much skill. But the OP is going to ask, so probably we will hear. Maybe, just maybe, there was actual legal work involved in earning the fee.

As mentioned before, many relationships involve clear moral hazards aka agency problems. As Warren Buffet opined: 'Don't ask a barber if you need a haircut." Same kind of risk.

 

[Midpack]

I guess I should be happy we declined a couple other add-ons that would have added another $1000 and $500 respectively. We didn't need them, but I assume some clients see a need...

 

[mn54]

I wouldn't worry too much about "one page." It is the skill of the attorney.

My siblings and I got charged $350 when I called Dad's attorney after his passing and asked a few questions. 10 minute call. No pages. Just advice, which was, "You don't need to do anything except go to the county office and file the will. Since it is a trust, you are done. Didn't I make that clear earlier?"

No he didn't. We were grieving and in shock. $350, please.

the cost of setting up our trust included any future changes, consultations, and any help our beneficiaries (children and grandchildren) may need after we are gone.

 

[ivinsfan]

I guess I should be happy we declined a couple other add-ons that would have added another $1000 and $500 respectively. We didn't need them, but I assume some clients see a need...

Re Joe's post maybe asking about the 1K charge will cost you even more money

My DH and his brother who makeup a farm corp, would ALWAYS stand and BS with the electrician and the refrigeration and the tractor mechanics. I would always say, Be quiet and let them work, this is costing us money,

 

[JoeWras]

True enough, but we are not talking abuot a document where adapting to the client requires much skill. But the OP is going to ask, so probably we will hear. Maybe, just maybe, there was actual legal work involved in earning the fee.

As mentioned before, many relationships involve clear moral hazards aka agency problems. As Warren Buffet opined: 'Don't ask a barber if you need a haircut." Same kind of risk.

Yeah. Attorney stuff is mystery to me. Then again, I know people who want stuff solved with 3 lines of code. I've done it a million times. Do it for free? Or charge based on my experience and know how? Maybe they could do it too if they invested in learning code. The funny stuff about legal is it is in English (kind of), so it seems like you should be able to do it.

Accused: "Your Honor, I'll represent myself."
Judge: "I would advise you retain counsel."

BTW, Midpack, my little charge with Dad was in Illinois. So, it isn't only NC.

the cost of setting up our trust included any future changes, consultations, and any help our beneficiaries (children and grandchildren) may need after we are gone.

Nice. I thought Dad had the same arrangement. My counsel informed me otherwise and made sure the invoice was sent to a good address. I probably got charged for the time it took to give our address. Ha ha.

 

[Midpack]

the cost of setting up our trust included any future changes, consultations, and any help our beneficiaries (children and grandchildren) may need after we are gone.

Ours most certainly does not, amendments will cost us each time. The attorney meets with us three times, and delivers the final product at the third and final meeting. He does entertain questions during the process, but not after the third meeting normally I assume.

 

[Happyras]

We wrote our own estate plan, sort of....I used a trial of XXXX software, which is used by many law offices. We chose a QTIP with a Clayton provision. I had my attorney review it. She had no changes. WA state is a very bad state for death taxes, so many do this structure to at least preserve some asset exemptions. Here is a pdf chart I found which helps explain. https://www.rcalaw.com/webfiles/Clayton Election.pdf

 

[SecondCor521]

My parents had/have a Credit Shelter / Bypass Trust.

They set it up in 1999, along with some other agreements that the attorneys said was necessary because Idaho is a community property state. I read the additional documents and never really was convinced of their necessity. I'm sure my parents paid several thousand dollars for these documents to be put in place.

My Mom died in 2016. After consulting with those same attorneys, it was recommended we do a TEDRA agreement. That cost $16K and took the better part of six months and killed quite a few electronic trees.

We now file federal and state income tax returns for the B trust annually. This required a CPA the first year for another $1500, but now I do because I can read and follow IRS instructions if you give me enough time. And it's mostly now just putting in this year's numbers on this year's forms. Although it does take me some time to collect, generate, print, collate, sign, mail, receive, deposit, and transfer the 26 different trust tax documents and spreadsheets each year. I also make an effort every year to figure out how much income to shift to my Dad's personal return in order to minimize taxes.

In terms of basis, the assets that went into the B trust got a step up in basis to their value on the date of my Mom's death. I don't believe they will get a further step up in basis when my Dad passes away.

In terms of estate taxes, OP and others might want to read up on the DSUEA. It requires a timely filing of an estate tax return (Form 706), and that's a long and complicated document (which probably requires a CPA and $500 to $1000) in order to basically check one box on like page 17 or something. But it may provide part of the functionality of a Credit Shelter Trust without having to go through the rigamarole of actually implementing a Credit Shelter Trust and doing everything we're doing now.

There has also been discussions of just automating the DSUEA election somehow where you can get it without necessarily filing a Form 706. But I'm not holding my breath for that law change.

...

I'd like to further add that I'm mildly annoyed at my Dad's CPA. When I suggested we file a Form 706 to preserve my Mom's DSUEA, his answer was that my Dad didn't anticipate his assets growing to exceed the estate tax exemption and it would be a bother to do something that probably wasn't necessary. Because he was the CPA and I was not, I let the matter drop. Now, it seems like it would have been a good bargain to pay that $500 or whatever and fill out the form in order to protect against the estate tax limit being dropped during my Dad's lifetime and costing his estate orders of magnitude more than $500 in estate taxes.

...

Bottom line, I used to think that "high quality" attorneys and CPAs were engaged in our situation as much as we were and would really do the absolute best, especially given what we paid them. Now I'm thinking that the moral hazard / agency stuff mentioned on this thread is a much more powerful force than I had reckoned, and that truly nobody cares about your finances as much as you do.

I suppose I may get burned with this attitude the other way, where me failing to write up a bunch of legalese and paying CPAs a kilobuck or two may cost me in the future. In fact I probably made that mistake in my divorce proceedings. But right now that's the way I'm leaning based on my experience so far.

 

[Dash man]

Ours most certainly does not, amendments will cost us each time. The attorney meets with us three times, and delivers the final product at the third and final meeting. He does entertain questions during the process, but not after the third meeting normally I assume.

We recently made some changes to our trusts, created an IRA Inheritance Trust for each of us to account for the SECURE Act, updated our POAs and pour over wills. They charged us $1,900 and our attorney was a partner in the firm. We had questions and telephone/Zoom meetings during the process. I don’t think it was unreasonable.