The saying goes, “there’s an app for that” and sure enough, there are plenty of applications, websites and software packages today that allow you to “create an estate plan” by yourself. I put the previous phrase in quotes because I believe it is akin to false advertising. An estate plan is much more than just a document—an effective plan requires knowledge, application of proven strategies, and an attorney with experience. Experience matters, because an estate plan that initially appears to be simple may have dangers lurking in the background, and only an experienced estate planning attorney can preemptively address and correct those issues.
Before you consider do-it-yourself planning, consider these five true stories of DIY planning gone wrong:
- The Suze Orman Trust: Suze Orman has a great reputation for no-nonsense talk on financial matters. A couple of years ago, a couple visited me and showed me the trust they wrote with Suze Orman’s Living Trust kit. The couple lived in Pennsylvania, but they had a California trust. California and Pennsylvania laws are significantly different, including property ownership laws, probate laws and more. Therefore, the trust they had was not appropriate for Pennsylvania and would have done more harm than good. Suze Orman talks a lot about avoiding probate, which is a valid concern in California, but generally not in Pennsylvania. Here, we had a case of over-planning and improper planning. Not everyone needs a living trust, including this couple.
- Honey, I Deleted You From My Trust: A gentleman made an appointment with me last year, and he wrote his living trust online. He was married with three children. He wrote the trust so that if he passed away, everything went directly to his three children. When I showed him and his wife the error, she was not happy… at all. Thankfully, we fixed this plan—and as it happened, this couple did not need a living trust either, so we were able to simplify their plan and get it right.
- Powerless Power of Attorney: I met with a couple who drafted their powers of attorney online. They were very proud that they had powers of attorney for virtually no cost. The problem? They left out key provisions, such as the ability to make gifts strategically if long-term care was needed. They had no backup power of attorney. Finally, they failed to execute the documents properly, meaning the plan would have been useless in a time of need. By the way, they also had no will, which they claimed wasn’t important because all of their assets were jointly held. A will is still vital in this case, because you still need to appoint an Executor.
- Special Problem: Recently, a couple retained me after they drafted their wills online. They have one child, and figured their plan must be simple. The problem is that their child is special needs, and their will left everything outright to their child. If this plan were executed, the child would be disqualified from receiving any public benefits. We drafted a special needs trust for this family so that their child’s inheritance would be protected and he would still qualify for public benefits.
- Where There’s a Will, It Won’t Help Your IRA: A widowed woman’s computer-savvy nephew drafted her estate plan online after her husband passed. She has two children, rents an apartment, and has most of her money in IRA’s and annuities. When I sat down with her about estate plan, we uncovered the fact that only about 10% of her assets would pass through her will. Also, after reviewing her beneficiary designation forms for her IRA’s and annuities, we realized her only beneficiary was her deceased husband. There were no contingent beneficiaries listed! Her will was a good start, but not what she needed. We setup a Retirement Asset Protection Trust for her IRA’s, so that they would stay in the bloodlines and her children would get the stretch-out benefits of the inherited IRA.
These stories and situations are common, and illustrate the dangers of do-it-yourself estate planning. Consider hiring an estate planning attorney as you make your own estate plan. A qualified attorney understands the right questions to ask, all of the strategies available, and the dangers lurking beneath the surface.