Many people try to save money with do-it-yourself wills and other estate planning shortcuts. A number of online programs offer these documents for free or for a low cost. It’s tempting, but there is a catch. Even with the simplest estates, there is a certain amount of complexity. Many times these shortcuts do not cover all the bases, or simply do not hold up to legal scrutiny.
Without legal advice, the average person is likely to make mistakes, assumptions or omissions. These could have unintended consequences, such as leaving your beneficiaries with significant costs or protracted legal disputes.
Many “shortcuts” cost more in the end
I have often had to deal with the aftermath of poor estate planning and DIY documents. Here are four of the most common estate planning shortcuts that people try to do on their own, sometimes with disastrous results:
A will from a “kit” — Online tools may purport to cover all the essentials, but a checklist is not a substitute for a “what if” back-and-forth with a knowledgeable attorney.
- A carefully constructed will and/or revocable trust can result in less time spent in probate, which means fewer costs for your heirs.
- Estate plans may need to be regularly updated and rewritten to account for the birth of new children or heirs, pre-deceased children and spouses, divorces, and other changing family dynamics.
- Missouri law requires two witnesses for a will. Missouri honors holographic wills (orally stated wishes) but only if made on one’s deathbed, and even then there is no guarantee.
- A will or trust should be drafted in conjunction with powers of attorney, an advance health care directive (living will) and guardian declarations for minor children. These instruments need to specifically worded to be useful and enforceable.
Joint Tenancy with Right of Survivorship — Rather than simplifying transfer of property, adding one or more people’s name to the deed adds layers of complexity and potential time bombs. Bankruptcy, divorce or creditor claims can encumber the property. It’s not a never-say-never, but JTROS must be executed carefully, and in consideration of all potential unintended legal consequences.
“Upon death” documents –The concept is to avoid probate and taxes by having property transfer directly when the person dies. But there are pitfalls to pay on death (bank accounts), transfer on death (tangible assets such as vehicles) and beneficiary deeds (real estate). For example, what if the beneficiary dies first? What if the grantor becomes incapacitated for an extended time and is unable to change inapplicable distributions? Or property may be subject to a waiting period of several months before a court will authorize the transfer.
Durable powers of attorney — Power of attorney (POA) designates someone to make decisions on your behalf if you are incapacitated. You might have one for business and financial matters and a separate POA for health care decisions. Again, the fine print is critical. You are turning over control of the most personal aspects of your life! If the wording is ambiguous, you could be taken advantage of, or your loved ones may be prevented from carrying out your wishes.
Make informed decisions
A carefully constructed estate plan can help your heirs keep as much of your money as possible, accounting for various tax structures, contingencies, probate, and family disputes. Whether your estate represents your savings and pension or includes a more complicated business structure, you need an attorney with in-depth knowledge in estate planning to carry out your final wishes.
Many shortcuts are a mirage. In the long run, they are neither simpler nor cost-effective. You are better off sitting down with a knowledgeable lawyer to make sure these important documents are drafted properly. At a minimum, consider having an attorney review your DIY estate plans.