Four Things to Consider About Do-it-Yourself Estate Planning Software
September 12, 2017 | Jesse Beier
As a price conscious homeowner, I am all for do-it-yourself projects to save a few dollars here and there. I often bite off more than I can chew, like the time I thought I could handle rerouting the plumbing in a bathroom. Predictably, this resulted in a flooded bathroom, water damage, and an emergency phone call to a plumber. The lesson learned from my misadventures in DIY home improvement projects is that certain jobs, such as plumbing and electrical work, are better left to the pros.
The same can be said about estate planning. In recent years, DIY estate planning has become more and more common, with software companies offering online fill in the blank packages to prepare basic wills, trusts, powers of attorney, and health care directives. While the price is right, often costing a fraction of what it would cost to hire an attorney, the results can be underwhelming and potentially disastrous in reaching the intended outcome.
When it comes to estate planning, one-size does not fit all.
One of my favorite aspects of the estate planning process is getting to know my clients on a personal level. The initial consultation gives me the opportunity to learn about each client’s unique set of circumstances. This helps me better advise on matter such as nominating fiduciaries, asset allocation, and appropriate distribution methods. Ultimately, this results in a tailor-made plan that helps clients accomplish their goals while staying true to their values. On the other hand, estate planning software typically involves the completion of a rigid online questionnaire instructing users to enter the names of nominated fiduciaries and intended beneficiaries and asset values. Options are limited providing users with little flexibility to address anything outside of the norm. The problem with this one-size fits all approach is that there really is no norm when it comes to working with living breathing humans. Every client has his or her own story that most often cannot be adequately addressed through the completion of a questionnaire. Estate planning is a highly personal practice; it boils down to much more than names of individuals and numerical values.
Lack of guidance could result in unintended consequences.
DIY estate planning software offers little to no guidance during the process and can result in unintended consequences. I recently worked with a couple that previously completed simple wills through a popular online service. After reviewing the documents, I noticed a vital error. The wills provided for a typical distribution, leaving everything to the spouse or alternatively in equal shares to the couple’s descendants, per stirpes. Unfortunately, the will neglected to address the fact that each spouse had children from a prior relationship with no common descendants, meaning that at the death of the surviving spouse, the estate would go to only the survivor’s children. Whether this mistake was attributable to human error or a lack of guidance from the software is unimportant. What is important is that this mistake was completely avoidable and likely would not have happened had the clients initially sought guidance from an attorney.
Improper execution of documents.
Oftentimes clients are surprised to hear that there are state specific requirements for the valid execution of a will. Clients have asked whether a signed note left in a safe place was sufficient to constitute a will or whether it is really necessary to have the signature witnessed. Each state has its own formalities for a how a will must be validly executed. While the differences may be subtle, there is no room for error. Invalidly executed estate planning documents may not hold up in court and could result in unintended consequences. This is especially true if a will makes specific bequests or if the individual intends to disinherit a child or other heir. There are plenty of horror stories in which a disinherited child challenged the validity of a will and prevailed, receiving his or her share of the decedent’s estate, despite the testator’s contrary intentions. While forms obtained online may provide instruction on making sure the documents are signed and witnessed appropriately, there is still a high potential for error. Working with an experienced estate planning attorney ensures that the correct procedures are followed and that the documents are validly executed.
Drafting is only the first step.
I regularly meet with clients that think the planning process is complete once they have signed on the dotted line. They breathe a sigh of relief and remark that they are happy to remove estate planning for their to-do list. What they fail to understand is that signing the documents is often only the first step. This is especially true for clients establishing trusts. While a trust can be an excellent planning tool, it is only effective if it is funded appropriately.
Many software companies offer fill in the blank revocable trusts, touting the benefits of probate and estate tax avoidance. While this sounds great, these companies often provide little to no guidance on funding the trust. An unfunded trust may have significant estate tax implications and/or a costly, completely avoidable probate proceeding. Funding a trust can be a complicated process. Working with an estate planning attorney can ensure that the trust is properly funded, including updating account beneficiary designations, retitling assets in the name of the trust, and preparing real estate deeds to the trust.
The bottom line.
In short, when it comes to estate planning, there is no substitution for receiving personal and professional advice from an experienced attorney. While there are a plethora of companies selling DIY estate planning kits, the lack of customization, guidance, and the high potential for mistakes may prove to be not worth the cost savings.