When Do-It-Yourself Estate Planners Have Fools for Clients
As a growing number of Americans use software or do-it-yourself kits to do their own esate planning, many are finding that the end results are far from what they’d hoped. With several real-life case studies of do-it-yourself disasters, this article addresses the problems that consumers face when they try to avoid legal counsel for this most important task.
It should come as no surprise that the nation which spawned Rugged Individualism in the nineteenth century is now a hotbed of Do-It-Yourselfers as the twentieth century comes to a close.
Americans like to be self-sufficient, and we love a bargain, especially when it means avoiding the fees of high priced
experts like doctors, accountants or attorneys.
Now our natural tendencies are being aided and abetted by breathtaking new technologies that give the lay person license to assume the mantle of “expert” in a wide range of fields. Self-help books that teach us how to be our own doctor or lawyer are becoming a mainstay of the publishing industry, while emerging computer technologies — from CD-ROM to the Internet — are making do-it-yourself kits as commonplace as cyberspace.
With all this information literally at our fingertips, it’s tempting to try doing for ourselves what we once paid others to do for us. But as we consider whether we can do without expert advice, we should probably remember the old adage about physicians. If the
doctor who treats himself has a fool for a patient, what can be said for the patient who becomes his own doctor?
There are times when doing it yourself is as bad — if not worse — than doing nothing at all. Here from the estate planner’s perspective are some pros and cons of do-it-yourself legal guides and the warning signs you should heed when professional help is warranted.
Now that the computer revolution has finally hit home, more and more home computing aficionados are looking for ways to justify their investment. Enter the software industry, which has filled the demand with programs that propose to take the place of your landscaper, architect, graphic designer, tax accountant, doctor, financial planners, and yes, attorney.
In fact, legal products are especially popular. Several software companies sell programs that will let you draft your own will or file your own divorce. If you fail at being your own Accountant or Financial Planner, do-it-yourself software will even let you handle your own bankruptcy.
Unfortunately, software programs don’t always reflect your state’s laws, and can’t take into consideration your unique goals, and your family situation, shortcomings with disastrous implications. We know of a client who used a best-selling software package to create a will for his father, who was dying of cancer. Although the dutiful son knew that the father had to sign the will before witnesses, what he didn’t know was that his father’s state of residence required that the words, “upon penalty of perjury,” must be part of the document so that the witnesses take their actions seriously.
When the father died, the son belatedly sought legal advice and assistance with probating the father’s estate. That’s when the son’s error was discovered. Fortunately for the son, the witnesses who had signed the will were still neighbors, and readily agreed to sign a declaration that would allow the probate to proceed.
CAUGHT IN THE NET
As a growing tide of Americans surf the Internet, more and more are discovering the wealth of information available at the stroke of the download key. Which reminds us of the ‘Net
devotee who decided to create his own revocable living trust using a document he downloaded from the Internet.
The client was on to the right idea. He wanted an revocable living trust because he knew it would keep his estate out of probate when he died. If he became disabled, it would allow his hand-picked Successor Trustee to manage his financial affairs for him according to the directions he’d provided. So far, so good.
Unfortunately, the document the client downloaded contained a devastating flaw, but it took a seasoned estate planning attorney to point it out to him. The document said that the client, as the Trustor, would be entitled to all income from the trust assets for life. If he became disabled, his Successor Trustee would be able to use all income and principal from the trust for his benefit. When he died, the trust assets would be paid to his beneficiaries.
When he proudly showed his do-it-yourself trust to an estate planning attorney, it took her all of 30 seconds to spot the problem. She pointed out to him that he had unwittingly put himself in a financial bind by denying himself access to his own assets if he was in good health. Fortunately, the estate planning attorney was able to amend his trust documents so that the client was assured of financial security whether in sickness or in health.
VOLUNTEERING FOR THE DRAFT
Self-help workbooks have been popular for years, and many individuals use them to draft their own documents. One woman came to her attorney armed with trust documents that she’d carefully copied — or so she thought — from a book published by a nationally known attorney. Despite the author’s many credentials, the reviewing attorney found significant problems with the documents and advised the client that her interests would be best served by a complete rewrite. The client resisted, arguing that the author was a published expert on the subject.
Then the attorney showed the client an error in the documents that would nearly disinherit her daughter. In a key passage in which the client meant to bequeath her entire legacy to her daughter, the document should have said that her daughter was to receive “all income and principal” from her estate. Instead, the client had written that her daughter should receive “all income from principal.” That simple mistake would denied her daughter the lion’s share of her legacy, an outcome vastly different from what she’d planned.
DO-IT-YOURSELFER’S WARNING SIGNS
Of course, there are times when taking the initiative can do you some good. Perusing a do-it-yourself workbook or software program can motivate you to start thinking about the estate planning process. It can also help to familiarize you with some of the issues you should consider. The danger, however, is when workbooks, boiler plate documents and software programs take the place of qualified expert advice. As we’ve seen, something as simple as the wrong word or a missing phrase can cost your families thousands of dollars and result in an outcome vastly different from your intent.
So before you rest your family’s future — and your own — on a do-it-yourself will or other estate planning tool, consider these words to the wise.
It May Be Cheap, But If It’s Not What You Want, It’s No Bargain
Today you can find a half dozen software products and countless workbooks that will help you draft your own will. But depending on your family’s situation, a will may be the last thing you want.
Wills require probate, and probate is often a public, time-consuming and costly legal proceeding. Your estate will pay for the legal fees and other costs incurred. And it may take months, or even years, before your heirs receive your legacy. Further, a will as an estate planning tool can’t help you if you become too sick or injured to manage your affairs for yourself.
That’s why alternatives, such as the revocable living trust, are much better
solutions. Because trusts are a bit trickier than wills, you won’t see as many do-it-yourself kits on the market, but their numbers are growing. So, as with wills, you should:
Beware of Simple Solutions for Complex Problems
One of the greatest failings of do-it-yourself legal solutions is that they lull consumers into thinking they’ve solved a pressing need, when in fact, they’ve done nothing of the sort.
For instance, as more Americans become concerned about the care they receive at the end of their lives, many have sought ways to control their options. One solution growing in popularity is the Living Will. This simple document, often no more than a page in length, lets the individual express his or her wishes on such issues as life support and invasive medical procedures. Because it is so short and simple, the Living Will is a popular topic for self-help software programs and do-it-yourself workbooks.
Unfortunately, growing evidence suggests that the Living Will doesn’t give individuals the control they’re hoping for. A recent study sponsored by the American Medical Association indicated that most individuals’ Living Wills are disregarded by the health care profession. The study cited the Living Will’s ambiguity and lack of enforcement options as some of the reasons why.
Far more effective than the Living Will is a document called a Health Care Power of Attorney. This document not only gives the individual ample opportunity to control how and when he receives medical treatment, it also empowers someone to act on his behalf to ensure that his wishes are met. But the Health Care Power of Attorney deals quite literally with life and death. So, you’ll want expert guidance as you consider this important estate planning tool.
Consider Your Family’s Special Needs
Are you divorced or remarried? Are you worried that your daughter’s no-good husband will squander her inheritance? Do you have a family-run business? Can you trust your 18-year-old son with the proceeds from your $150,000 life insurance policy? Is there a stepchild, close friend or someone else in your life that you’d like to see inherit from your estate? Do you have a child, spouse or aging parent who needs special care you want to ensure they receive after you’ve gone? Is there an organization, church or community group that you’d like to leave a bequest?
Today life is complicated, and few Americans fit the Ozzie and Harriet stereotype.
That’s why a cookie-cutter approach to estate planning leaves most families far short of their goals. In contrast, wisely drafted estate planning allows individuals to exercise maximum control over how and when their legacy is passed on to their loved ones, something you can’t achieve with a workbook or software program.
Maximizing Tax Breaks Is No Job for AmateursLike it or not, successful tax planning is still the domain of the experts. It takes know-how to implement strategies that will help you reduce income taxes, avoid capital gains taxes, and reduce — or even eliminate completely — estate taxes. Without that expertise, do-it-yourselfers will expose their hard-won wealth to unnecessary taxes, which can seriously erode the value of the assets your loved ones inherit.
Keep in Mind the High Cost of Failure
You may never know how badly you’ve botched your estate plan. Instead, your family may pay the price for years to come. Taxes aren’t the only threat to our assets. Poorly executed estate plans can result in unnecessary legal fees. Further, ambiguity can mean that someone other than those we intended will inherit a piece of our estate. Or worse, we may create an opening for opportunists to stake a claim to assets we’ve earmarked for our loved ones. Failing to plan properly also robs us of the opportunity to see our legacy benefit the organizations we care about. Lastly, it takes special planning to address the unique needs of a disabled child, parent or other family member.
Of course, it may not be solely our loved ones who suffer. If we should become so disabled that we can’t manage our affairs for ourselves, we may be forced through conservatorship (also known as guardianship) proceedings, during which we will be declared incompetent and the court will appoint someone to be responsible for our care. The unintended consequence can be unnecessary expense and a complete loss of control over our own destinies.
The point is, you get what you pay for, and a bargain in estate planning — just like a discount parachute — may bring you back down to earth with a thud.
WHEN TO GET EXPERT HELP
Sometimes a constant headache is just a sign that you need reading glasses, not surgery to remove a brain tumor. But most of us are in no position to know the difference without consulting a professional. So, if the do-it-yourself bug has you hopelessly infected, at least do yourself one favor: ask an estate planning attorney to review your handiwork before you or your family discover that what you thought was a bargain will end up costing you a fortune.