I am frequently asked what could be the potential downside to using DIY online software or a non-attorney (such as a financial advisor or independent paralegal) to prepare estate planning documents? I tell clients: services like Turbo Tax exist and yet people still pay their CPAs to do their taxes. Why? Because they want to make sure it’s done right. In short, you get what you pay for.
Often, I see plans come to us after a loved one has passed and the DIY documents from places like Rocket Lawyer or Legal Zoom or documents prepared without legal advice leave the family with a much bigger mess to clean up. People think they are doing the right thing by getting something in place for the ones they love, but don’t realize their attempt to save time and costs actually come at a much greater cost of time and money to their family when the plan fails.
Here are the top 5 mistakes I see from DIY plans or plans created without legal advice:
1. Forms are Created for a Specific State. Often, these forms are created for a specific state, which may not be the state you actually live in. States have different property and estate planning laws that can affect how things go, so the forms you’ve chosen may not work when your family needs to count on them. And regardless of the form of the document, property laws for a state may override the document, so it’s important to understand how the law applies to your property and plan.
2. Inaccurate or Incomplete Information Leads to Disaster. A questionnaire asks specific questions, and people fill them out incorrectly or incompletely. Then the documents don’t do what they want them to do and the documents won’t protect their assets or their family when the time comes.
3. Assets are Left Outside of Estate. People may create a trust online but then they don’t correctly transfer assets into their trust, which causes the plan to fail. When that happens, the trust is hardly worth the paper it is printed on because it’s not doing the work of avoiding probate court as intended.
4. Documents are Executed Incorrectly. Rules about how documents must be signed, or later changed, are very state specific – – some require notaries, one or more witnesses, or both. And later changes made by crossing out information and writing in the change can create even more problems.
5. Opportunities for Advanced Planning Strategies are Overlooked. Software can only be programmed to do so much. Advanced estate planning tools are not adequately addressed, which include minimizing taxes, planning for disabled beneficiaries who could stand to lose public benefits, or protecting your assets for your kids from creditors, lawsuits and future divorces.
So while the advantages to these DIY plans are that they seem quicker and cheaper than legal advice, they can often come at a much greater cost to your family in the long run.
Good estate planning generally begins with a detailed analysis of each asset and goal held by a client, so that a client can be empowered to choose the plan that fits their goals and can understand how to best title assets to keep their family out of court and out of conflict. If you aren’t sure whether a DIY plan will actually work when the time comes, I recommend scheduling a Family Wealth Planning Session so that you can make decisions for you and your loved ones with your eyes wide open, from a place of knowledge and empowerment.