How Do-It-Yourself Estate Planning Can Go Wrong

You might believe that creating your estate plan on your own will save you money. However, it can be costly in the end, both financially and in terms of family wellbeing. Estate planning involves important decisions about how your assets will be distributed after you die and who will manage your affairs. Online do-it-yourself resources don’t always tailor to your specific needs and may not consider important legal requirements in your state.

Basic Parts of an Estate Plan

A basic estate plan typically includes the following documents:

• A Will – This document outlines who gets your property, names an executor to oversee your affairs, and designates guardians for your minor children. If you die without a will (intestate), the distribution of your assets will follow state intestacy laws and may not reflect your wishes.
• Living Trusts – A living trust lets you keep your property out of probate, the court process of distributing your property after death. Probate can be time-consuming and expensive and becomes part of the public record. For these three reasons, estates with significant property often use a trust. Whether a trust is necessary for your situation can be determined with the help of an estate planning attorney.
• Durable Financial Power of Attorney – A durable financial power of attorney names an individual to manage your finances if you are unavailable or become incapacitated.
• Health Care Directives (Living Will and Health Care Power of Attorney) – A health care directive can name a representative to make health care decisions on your behalf when you can’t and state your preferences for health care, end-of-life care, organ donations, and final arrangements.
• Beneficiary Designations – Accounts such as IRAs, 401(k)s, bank accounts, mutual funds, annuities, and life insurance policies can transfer directly to heirs outside of probate by naming beneficiaries.

Many legal strategies are considered if your estate or family circumstances are complex.

What Can Go Wrong If I Do It Myself?

Creating your estate plan may be appropriate in limited circumstances. However, many things can go wrong. The money you believe you save upfront can create financial and emotional stress for your family after your death. People pay for professional expertise to prevent problems they aren’t aware of or haven’t considered. This advice leads to more successful outcomes.

The Simple Plan

If a surviving spouse’s assets consist of the value of their home and bank accounts that are nearly equal in value, a simple will may give the home to one adult child and the bank accounts to the other. At the time the will is created, it may seem like a simple way to divide assets.

If the will is tucked away without further review or update, circumstances may change. Upon the parent’s death, the two inheritors could find one has a home that has grown in value. The other heir finds the deceased parent had to spend down cash assets to cover increasing medical bills and living expenses and inherits far less. This type of situation often leads to litigation and ruined relationships.

Beyond the financial inequity of the inheritance, a rift exists between the two siblings, which can divide the family, extending to younger generations. Over time, the parent’s simple plan did not reflect their intentions for their children.

The Legal Details

Your will, trusts, and other estate planning documents must comply with ever-changing state law. For example, drafting your will without legal oversight creates a significant risk of error. Wills must clearly state your intent. In legal terms, failing to use words such as “testamentary intention” may void the will. Similarly, using vague terms such as “I would like” may render your intentions unenforceable. Variations of legal terms are in all estate planning documents, not just a will.

Coordinating Probate and Non-Probate Assets

A will governs the distribution of assets held solely in your name. Assets owned jointly through a beneficiary designation, contract, or similar arrangements are non-probate assets. They may include 401(k)s, IRAs, joint bank accounts, insurance, real estate, and family homes. Structuring the ownership of assets to meet specific goals, like asset protection and avoiding probate, is best guided by an estate planning attorney familiar with the process.

Marriages, Divorce, Births, Incapacity, and Death

Many events can profoundly alter a person’s life. They also may change how you distribute assets in your estate. For example, some states have adopted variations of the Uniform Probate Code, which automatically revokes anything left to a former spouse, and the court must determine who gets their share. Other states require specific estate document updates to remove a former spouse.

An estate lawyer can regularly review your documents with you to ensure they reflect your current family situation. They can also draft documents for power of attorney so that if you become incapacitated, a plan is in place for your estate’s management and health care wishes. A routine review of your estate plan is essential to handle significant life events and account for any changes in estate planning laws.

Other Challenging Arrangements

Every person’s life and estate are unique. A template can’t accommodate all eventualities.

• Same-sex and unmarried couples face different challenges as the law tries to catch up to less traditional marriage and living arrangements when making an estate plan. A partner could be left without an inheritance if estate documents aren’t carefully executed to comply with state laws.
• Special needs planning for loved ones who are disabled requires targeted planning so they continue to receive financial assistance and maintain eligibility for government benefits.
• Some estates require complex arrangements to reduce state and federal taxes or multi-state and international issues.

The challenges are so varied that you risk creating an unenforceable estate plan without the guidance of an estate planning attorney.

Take Your DIY Will to an Estate Planning Attorney

An estate planning lawyer provides more than technical expertise in drafting complex documents. They can provide guidance and counseling for important decisions, helping you identify the best representatives to manage decisions and actions required in your estate plan. A do-it-yourself estate plan is often incomplete or incorrect. Any mistakes or oversights can lead to legal complications or disputes among heirs.

For most people, working with an experienced estate planning lawyer is essential to ensure documents meet your needs, goals, and legal requirements. While saving money using a do-it-yourself approach may seem tempting, the risks can far outweigh any potential cost savings.

This article offers a summary of aspects of estate planning. It is not legal advice and does not create an attorney-client relationship. For assistance, please contact our Forty Fort office or call (570) 288-1800.