How Your DIY Will or Trust May Be a Problem

This is an article from Anderson, Dorn & Rader (www.wealth-counselors.com) in Reno, Nevada, that we thought others may find helpful.

If you are thinking about drafting your last will and testament or revocable living trust  using one of those do-it-yourself (“DIY”) products, you may want to reconsider. Despite how popular these form documents have become and the reduction in cost they promise, these computer generated products do not compare to professional legal work.  Even if the document you bought has some of the hallmarks of a professional document, there is always a risk that DIY wills or trusts may not work the way you expected and may even prove to be invalid.

What does drafting a will or trust actually involve

A last will and testament is a written legal document that describes to everyone who survives you how you intend for your estate to be distributed. A revocable living trust is used by many as a substitute to a will to achieve a more efficient distribution of estate assets outside the purview of the probate courts. Both documents may be revised or rescinded at any time during your lifetime to take into consideration changes in your family circumstances or laws. There are numerous clauses that are important to consider including in a thorough, well-drafted will or trust. The vast majority of the DIY products reviewed in our office lack the detailed provisions you may need in order to meet your estate planning goals and objectives.

The risks of settling for DIY estate planning products

Before you make the decision to substitute professional advice with online estate planning products, you need to first understand the risks of doing so. This is especially true in complex legal matters like estate planning. Most of the mistakes that occur with DIY wills come from how the document is executed. For instance, people often fail to have the document properly witnessed, which typically requires two independent witnesses signing the document simultaneously. If the DIY will is not properly witnessed, it could be held to be invalid and create a serious issue. Many states require that at least one witness not be a beneficiary. Other very common mistakes include misspelled names and ambiguous terms that require interpretation by a court. In the realm of DIY trust planning, the DIY service providers generally provide very little guidance on funding the trust properly, and none of them we have experienced provide customized advice on how to coordinate beneficiary designations on IRAs or tax qualified retirement plans with the overall estate plan. This can result in retirement plan assets being improperly distributed upon your death.

The American Bar Association’s warnings about DIY estate planning products

Some of these common mistakes can easily result in legal issues that require a petition to the probate court for instructions after your death. Most of these issues cannot be quickly rectified with a few simple modifications. The American Bar Association has created a Task Force to evaluate the use of certain do-it-yourself methods in estate planning, including DIY wills and trusts. The biggest danger clients face in preparing their own estate plan with a do-it-yourself product is the false sense of security because they are unaware of the errors which will potentially undermine their plans. In addition, unlike an estate planning attorney, these companies do not carry professional malpractice insurance, so the risk of their mistakes is merely covered by the assets of the company.

Situations where DIY estate planning products may be adequate

There are some very limited situations in which a do-it-yourself estate planning product may be sufficient to meet your needs. If a client has very limited non-shared assets, a DIY Will may be sufficient if the client intends to leave those assets to his or her closest living relative outright. On the other hand, if a client has substantial assets that are more complicated or there are other issues that by their nature do not generally surface in a DIY estate planning process, the use of a DIY estate planning solution could have serious consequences.

Why you should consult an experienced estate planning attorney

While a DIY will may be an inexpensive alternative to hiring an estate planning attorney, the consequences outweigh the benefits. Not only do you risk leaving your family in financial and emotional turmoil, but your legacy could be lost to enormous legal fees or unnecessary taxes.

The job of an estate planning attorney is to provide legal advice in a legal field that typically requires drafting complicated documents that, when improperly drafted, can result in serious consequences. An experienced estate planning attorney will ask the appropriate questions to identify all the issues that should be addressed in a complete estate plan. This is why the American Bar Association’s Task Force encourages people to reconsider before using a do-it-yourself product to create their estate plan.

Estate planning is never a one size fits all process

The risk of errors in executing DIY Wills is not the only reason you should reconsider the use of those products. Wills are not one size fits all by any means. Wills, as well as most other estate planning documents, are meant to be customized because no two clients have the same family or financial situation. That is why it is important to work with an estate planning attorney who has the knowledge and experience to help you create the perfect plan. Otherwise, your estate plan may not be valid or may not work the way you expected.