We understand the desire to save money with DIY estate planning, but it is never a good idea. There are three main reasons people create estate plans: to distribute assets to the people and organizations they love most, to protect the financial and physical well-being of loved ones, and to minimize unnecessary taxation. Unfortunately, all of these are compromised when you do your own estate planning.
Failure to comply with estate laws or not understanding all of the fine print and potential loopholes means heirs and beneficiaries can miss out. Worse, a poorly executed or vulnerable estate plan means the estate runs through probate, and the court’s decision may not align with your original objectives.
10 Major Pitfalls of Creating DIY Estate Plans
It’s worth a single consultation with an experienced estate planning attorney to get professional advice, input, and information about things you didn’t know to consider. If you opt to use online forms and DIY estate planning tools after that, we suggest taking finalized documents to the attorney for review in case you missed something.
1. Overlooking essential items (estate plans aren’t one-size-fits-all)
Any offers, website pages, or software programs geared for online or easy “DIY Estate Planning…” are inherently one-size-fits-all. They don’t know anything about you, your lifestyle, current assets (perhaps even assets you don’t know you have), tax bracket benefits, and so on.
As a result, you can wind up “settling” your estate in ways that don’t make sense in the big picture. You could miss out on savvy ways to protect unique or unusual estate features. You may forget accounts, neglect small business considerations, or unknowingly put the estate at risk for unnecessary taxes or fees.
Basic software programs often leave out important information, including the potential need for backup or contingency executors/beneficiaries. Most importantly, DIY legal programs don’t continue to check in with you to assess whether your needs/wishes here in 2019/2020 are the same as they are in 2015, 2030, and so on.
2. Potential squabbles between siblings/heirs lead to probate
You thought you drew up a beautiful will. And, perhaps you did. If, however, your heirs start to quarrel about the contents, all that hard work may come to nothing. If a DIY will or trust is remotely contestable, it moves through the probate courts.
There are several reasons you don’t want that:
- Heirs and beneficiaries may wind up spending far more on a probate attorney than you would have if you had scheduled a few appointments with an estate attorney.
- Probate is a long and laborious process
- The state’s firm guidelines on inheritance succession may be a direct contrast to how you divided your estate.
- Sibling and inter-family arguments about who gets what destroy families.
- You may have left out important details leading to excessive estate taxes and fees that would have been avoided otherwise (see #6).
- You’ve neglected to include important information about pet care, guardianships, medical directives, or who should make decisions if you’re incapacitated.
This list could go on and on. Ultimately, estate planning should be done under the guidance of a lawyer.
3. Estate plans are rarely “fixed” forever
Comprehensive estate planning is a living process; related documents must be changed and amended with moving paWehy we advise setting an “estate plan anniversary” and reviewing estate planning documents annually. You may be surprised at what you find due to divorces, family deaths, the birth of new family members, reorganization of priorities, recently liquidated or acquired assets, and so on.
Just as estate plans can change, so can estate laws and tax requirements. Your lawyer will keep you abreast of new or relevant estate, inheritance, or tax laws that might affect your current plan. We can also review the documents periodically, suggesting any amendments that might benefit your estate.
4. You’ve probably missed something
Comprehensive estate plans cover a tremendous amount of ground. Foundational will or trust documents are only a piece of that puzzle. If you do plan to go the DIY estate planning route, make sure your documents cover the following ground:
- What to do if you’re incapacitated.
- Advanced medical directives.
- End-of-life plans (vigil or not? Burial, cremation, or green disposal options? Funeral or celebration of life? Special requests or instructions).
- Charitable donation requests.
- Guardianship for minor children or children/loved ones with special needs
- Who will take care of your pets? And are their accounts set up to pay for anticipated pet expenses?
- Instructions or preferences for inheritance or beneficiaries in a blended family.
- And so much more.
Estate planning is complex. Working with an attorney allows you to answer a range of questions so your estate plans personally fit your situation and preferences.
5. Neglecting guardianship and visitation preferences for children
We covered this in Number 3, but we can’t reiterate how important it is that anyone with a child file a legal estate plan with solid plans for guardianship. This is especially true if you want a step-parent, in-law grandparents, or other loved ones to have visitation rights with your child(ren). Step-parents and grandparents do not automatically have any right to visit or spend time with child(ren) unless you’ve gone through all the proper channels to make it so – providing accurate documentation to all parties involved.
Failure to file legal documents about such an important matter puts your children’s well-being at risk, especially if the family isn’t in consensus about where they should live.
6. Paying unnecessary taxes and fees
Depending on how your estate plan and trust(s) are set up, you may be paying unnecessary taxes and fees. As estate planning professionals, we work to create an estate that minimizes taxes and fees wherever we can. Similarly, without proper guidance, your heirs/beneficiaries may wind up with only a portion of what you intended if the estate is taxed because you didn’t put the right protective measures in place.
7. Not understanding the differences between wills and trusts
Wills and trusts are not the same. Very few people or households can get by with only a will. Trusts are almost always the best option. Running through the differences with your attorney ensures you make the right choices based on your current life and future plans.
8. Neglecting important information about your end-of-life wishes.
Estate plans aren’t just about inheritances and bequeaths. They also include our clients’ wishes about their end-of-life plans, including detailed instructions about their after-death care, funeral arrangements, and so on. These plans may evolve as you age, learn more about your options, or with new medical diagnoses or prognoses.
Most DIY estate plans are sparse with information or plans in this regard, which makes it harder for their family and loved ones to know what to do next.
9. Not consulting with a financial advisor
In most cases, your estate plan attorney provides one essential part of the puzzle, while financial advisors provide other essential pieces. If you are on the fence about working with an estate lawyer or doing a DIY estate plan, we highly recommend consulting with a fee-based financial advisor (if you don’t have a financial advisor of your own).
Fee-based financial advisors get paid by the time you spend with them rather than the money they make from your investments, yielding more objective advice. If you don’t have one, your estate planning attorney can provide referrals they trust.
20. Spending more money than necessary
The irony about DIY estate plans is that people do them to “save money.” And yet, because they leave things out, risk having their plan contested or settled in probate, and don’t usually understand current estate/tax laws, their loved ones can wind up spending far more money than necessary to clean things up and resolve it all.
Schedule At Least One Consultation With an Estate Attorney
We recommend investing in at least one full consultation with a Bay Area estate attorney to ensure you’re on the right track. Don’t put yourself – or your heirs – at the mercy of DIY estate planning mistakes or oversights. Contact Tseng Law Firm.