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153 N.J.L.J. 1298
September 21, 1998
7 N.J.L. 2250
September 28, 1998
COMMITTEE ON ATTORNEY ADVERTISING
Appointed by the New Jersey Supreme Court
OPINION 25
Living Trusts
This matter originated as a result of several grievances filed
by members of the bar against an attorney who caused flyers
regarding living trusts to be published in various newspapers. The
grievances alleged that the flyers contained numerous statements
that were either actually or potentially misleading in violation of
RPC 7.1(a)(1).
Upon completing its initial review, the Committee determined
that the flyers violated RPC 7.1(a)(1). A formal Complaint was
filed, and the Committee and Respondent ultimately entered into a
Stipulation of Facts and Discipline. However, during the course of
this investigation, the Committee received additional grievances
alleging that other attorneys were employing similar advertising
and marketing techniques. Consequently, the Committee concluded
that the pervasiveness and nature of the conduct warranted a formal
advisory opinion. The purpose of this opinion is to place
attorneys on notice that if they undertake to include specific
advice and statements about the law in their advertising, they
should exercise great care to ensure that the statements they make
are accurate and not in any way misleading.
The flyers, published under the headline "New Jersey Law Firm
Reveals Important Facts You Should Know About Living Trusts,"
provided general information about living trusts and invited the
reader to attend a free seminar. In an effort to extoll the
virtues of living trusts, at the expense of more traditional estate
planning tools, the following statements, which the Committee found
to be misleading and improper, were made:
1. What they do in probate court is
decide if your will is valid, handle
disputes, distribute assets and tie up
any loose ends. The problem with it is
... it can be incredibly expensive, time
consuming, and a total invasion of
privacy.
Very few probate matters are actually heard in Superior Court,
Probate Part. Ordinarily, an executor of an estate will present an
application for probate of a decedent's will at the County
Surrogate's office. The executor may appear pro se and, assuming
there are no irregularities on the face of the will and no caveat
is filed, the Surrogate will issue letters testamentary to the
executor within one to two weeks of the executor taking the oath of
office. This being the case, the process is not all that time
consuming.
As a general rule, an action to determine the validity of a
will in Superior Court, Probate Part, is an extremely rare
occurrence, taking place only when a caveat has been filed, there
is an irregularity on the face of the will, or where formalities
for the execution of a will were not satisfied by the decedent. It
should also be noted that living trusts are also subject to the
jurisdiction of the Superior Court, Probate Part, and may be
challenged by any disgruntled persons or interested parties.
Additionally, neither the Surrogate nor the Superior Court
distributes assets. It is the executor of the estate who
distributes the assets of the estate. No court order is required
to make a distribution or series of distributions. The Superior
Court may, in a will contest, order a distribution or direct an
executor to withhold distributions, but this is a rare occurrence.
Simply stated, the Surrogate and Superior Court judges do not
distribute assets, "tie up loose ends," or in any other way take an
active role in the administration of estates.
Finally, the costs associated with the probate process are
relatively low. In fact, the average cost is approximately $74,
with additional Surrogate's certificates available at a cost of
$3.00 per certificate. It is also possible that there will be no
payment of attorney's fees if the executor/executrix undertakes the
probate process pro se.
2. Every curious neighbor, disgruntled
relative, and con artist around is welcome to
examine every detail of your finances - and
what you left to whom.
Details of a decedent's finances will not be found in the
application to probate the decedent's will, which is kept on file
and is available for inspection at the Surrogate's office. Nor
will they necessarily be found in the will itself. Only if the
will is contested, and the court orders that an inventory of the
estate be conducted or an accounting filed, will such details be
open to inspection.
Additionally, if an individual dies with assets held by the
trustee of a living trust, and also owns assets in his or her
individual name, the executor of the estate will still be required
to probate a will in order to transfer title to those assets. The
will, which generally pours the probate assets into a living trust
established by the decedent, will be available for inspection at
the Surrogate's office and give notice that the decedent created a
living trust.
3. When your beneficiaries finally get the
property that's rightfully theirs, they may
have to pay out a large percentage of it in
lawyer's fees.
The administration of a living trust is virtually identical to
the administration of an estate. The only differences are that a
will must be probated in an estate administration and the executor
must gather the decedent's assets. Only if the decedent
transferred all of his or her assets to a living trust prior to his
or her death would probate be unnecessary. In most cases, a will
is still part of an overall estate plan and will be subject to the
probate process.
Assuming an attorney charges a fee for services on the basis
of billable time, there will be a very small differential between
the cost of administering a probate estate and the cost of
administering the assets of a living trust. In fact, if the costs
of establishing and funding a living trust are added to the cost of
preparing the will and administering the trust, they may actually
exceed the cost of preparing the will and administering the probate
estate.
4. If you're married and you create a living trust
now, you can actually double the amount you will be
able to pass on to your children -- to $1.2
million.
At the time the advertisements were published, the exemption
equivalent against the federal gift and estate tax was $600,000 per
person (the "unified credit"). This exemption was, and in a higher
amount still is, not limited in its availability to those
individuals who establish a living trust. If a married couple (1)
titles assets so that each person has at least $600,000 in his or
her individual name and (2) has a will prepared which either leaves
assets to persons other than the surviving spouse or leaves the
assets in a testamentary trust for the benefit of the surviving
spouse which is designed to take maximum advantage of each person's
unified credit, then the married couple will be able to leave $1.2
million to their heirs completely free of federal estate tax.
5. More and more, the biggest problem you face as
you grow older, is not so much what happens when
you die, but what happens when you can't take care
of yourself. An increasing number of Americans
each year are suffering accidents, strokes, and
affliction such as Alzheimer's disease that are
forcing them out of control of their lives and
finances.
In such a situation, before you or your family
could even touch any of your assets - to take care
of you or support themselves - someone would have
to be appointed your legal guardian. This is done
through a legal process called guardianship which,
like probate can be extremely costly, time-
consuming, and upsetting to all involved. And
after its done, scrupulously accurate financial
reports must be filed for the rest of your life.
The good news is, also like probate, you can
completely eliminate the chance of this ever
happening to your family by setting up a living
trust.
The creation of a living trust does not prevent any party in
interest from filing a petition in Superior Court to have an
individual declared incompetent. Moreover, the ability to place
control over one's assets in the person or persons of one's choice
is also available through the use of a durable power of attorney.
Based upon the foregoing, the Committee holds that the
aforementioned language is misleading and may not be included in
flyers, targeted direct-mail solicitation letters, or any other
forms of advertising or solicitation.
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