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                                         153 N.J.L.J. 1298
                                        September 21, 1998

                                        7 N.J.L. 2250
                                        September 28
, 1998


Appointed by the New Jersey Supreme Court


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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