Why You Should Avoid DIY Estate Planning
The terms "DIY" and "estate planning" are never good. But unfortunately, here in the US, we love do-it-yourself projects, and many people think it's the best way to go about estate planning in Huntsville, Alabama. What's worse is that they believe they can find out everything they need to know by searching through Google.
While the internet can provide a lot of viable information, it genuinely won't do you much good if you're not working with an experienced Huntsville attorney. Estate planning is an incredibly involved process, especially if you have a family with young children or a small business. There's just too much stuff you don't know that you need to know, and no amount of fill-in-the-blank forms or DIY estate planning kits online will clue you in on the missing information.
In this article, we'll break down the risks of DIY estate planning here in Alabama, so you'll l learn about all the things you don't know that you need to know when it comes to the process. So keep reading to learn more.
The Risks of DIY Estate Planning
DIY estate planning often appears simpler and more cost-effective than hiring a Huntsville attorney. However, some of the messiest probate proceedings happen because DIY estate planning goes wrong.
Call it a hunch, but you probably aren't all that familiar with the probate court, the probate process, and what happens if your DIY estate plan is rendered invalid. Even if you know the simple definition of probate, it's highly unlikely that you're familiar with Alabama's laws revolving around probate and estate settling.
Don't worry; we'll get to all of that later. Let's talk about exactly what an estate plan is and what can go wrong.
The first thing you need to understand about estate planning is that it doesn't come together with just one document that you'll later file under "estate plan." Instead, an estate plan includes a list of all your assets — including your money — and your plans for those things after you pass on. However, another important element of estate planning is planning for the unfortunate event that you become mentally incapacitated.
An estate plan is a collection of documents that create the legalities around your wishes for both of these events. It ensures they happen according to every last written detail. If you don't know what you're doing, there's a very good chance you'll leave something out or mess up the documents completely.
Now let's talk about the risks involved with DIY estate planning:
The Problem with DIY Wills
Wills are arguably the estate planning document that people are most familiar with. But unfortunately, it's also the only document that most people think they need to take care of their estate.
At a minimum, a will is a legal document that spells out precisely what you would like done with the assets in your estate once you pass away. Many websites and even apps offer a platform for step-by-step DIY wills; however, there are a few caveats.
The first caveat is that your estate grows in size as you accumulate assets. Therefore, the overall value of your estate increases, as will the number of people and contingencies you'll want to include in your will. Essentially, wills are documents that require housekeeping, meaning you'll need to update them every so often to ensure they reflect your estate's current value and situation.
DIY wills also don't account for the changes that happen in life. So, if you have kids, get married or divorced, or come into a large amount of money or other valuable assets, you'll need to be the one who physically makes the proper adjustments to your will. There's also the matter of your will becoming invalid. This can happen if your will isn't constructed properly.
Lastly, are you sure you know exactly what goes in a will? This is especially important if you have minor children, pets, or a business to think about.
The Problem with DIY Trusts
A trust is also a legal document; only this document is meant to pass on specific assets to specific beneficiaries. Unlike wills, trusts tend to come with certain conditions, such as a disbursement date for the assets, depending on what they are and who the beneficiary is. There are also several different types of trusts, and they can be either revocable or irrevocable — which means you can either change your mind about the stipulations or you can't.
Trusts also come with certain tax advantages for your estate, but that's only if you select the right type of trust. These documents also have the advantage of completely bypassing probate court and keeping your assets and beneficiaries private. However, with all the options out there regarding which type of trust is right for you and your estate, a lot of research will have to be done on your part if you go the DIY route.
Generally speaking, trusts can be very time-intensive as they are detail-oriented documents. This is because they're highly personalized documents that depend on your state's laws, which means an online trust template won't cut it. Furthermore, a lot can go wrong when you use a DIY trust template. It could end up costing you even more money down the line — especially if you choose the wrong type of trust for your situation, the wrong trustee, or don't allocate the right assets into it.
One Size Doesn't Fit All
The various software programs, templates, and website pages labeled "DIY estate planning" are a one-size-fits-all deal. However, your unique situation and estate are not. These DIY offerings for estate planning don't know anything about your or your life, your current assets, which assets you stand to gain, your tax knowledge, or anything else you've got going on.
Plus, most of the documents involved in estate planning take an experienced attorney's knowledge to get right. This is because estate planning differs from state to state, which isn't typically reflected in the cookie-cutter documents provided by these DIY estate planning kits. This means you'll likely end up settling your estate in ways that don't make sense for your family in the future.
It also means you'll miss out on all the methods that an experienced attorney would use to further protect your estate and save you money down the road. These DIY estate planning kits always leave out important information, such as needing a contingency plan for executors and beneficiaries. They also don't check in with you over time to assess whether you've gained new assets or whether your wishes are the same now as they were a few years ago.
Therefore, not only is there a greater chance of you messing something up, but also a very high chance that you'll end up leaving a mess for your family to fix after you're gone.
You're Going to Need More Than Just a Will and Trust
The terms "will" and "estate plan" are often used interchangeably, and many people assume that trusts are for the wealthy. Well, a last will is not an estate plan, and you don't need to have a network of a million dollars to form trusts. These are also not the only documents you'll need to consider for your estate plan — another common mistake people make when thinking about future planning.
This is something else that most DIY estate planning offerings tend to leave out.
A last will is a non-negotiable item to have in your estate plan as it contains the exact instructions of what you want to happen once you pass away. However, it does nothing for the here and now or the possible happenings in the future. That's why an estate plan must take the following into consideration:
Your current assets and investments
Your current and future financial plans include college funds, retirement, disability allowances, mortgages, debts, due dates for payoffs, insurance policies, etc.
Your current and future tax responsibilities, including how much of your estate will need to be set aside to pay certain taxes
Bequeaths once you pass on — as in accounts that will transfer, assets that certain beneficiaries will inherit, etc.
The potential benefits of a living trust
Advanced medical directives
Your Powers of Attorneys (POAs), including a healthcare POA, financial POA, a direct POA, and more
Guardianship for any minor children and associated trusts to manage their expenses
Guardianship for any pets and funds for their care
The list goes on
For most people, this list alone is complex. Each bullet point comes with a multitude of variables to consider and options to choose regarding potential future situations. These things are far too complicated for DIY estate planning programs and templates to address competently.
It Also Doesn't Include Legal Advice
Generic estate planning forms are not attorneys. You can't ask them questions, and they cannot offer you advice or even warn you of any mistakes you're making. In addition, an online estate planning template won't be there for your family once you're gone.
For example, what happens if both you and your spouse pass unexpectedly, leaving minor children behind? Suppose you've chosen a guardian for them. In that case, that's great — but have you considered setting up trusts to ensure they're taken care of financially throughout their college years? Young children cannot manage money on their own, and your Huntsville attorney wouldn't recommend leaving one lump sum for their future in the hands of their chosen guardian.
Ultimately, leaving the settlement of your estate up to your family after you're gone with no one to turn to for advice is a bad idea.
You'll Be Putting Your Loved Ones at Risk for Legal Disputes
A well-planned estate will be detailed, transparent, and correctly filed by an attorney — making it a foolproof legal document. On the other hand, creating an estate plan on your own means leaving your estate vulnerable to costly mistakes.
Think of it this way: You want the settling of your estate to be as quick, painless, and inexpensive for the loved ones you leave behind. This means ensuring that your estate plan is legally sound and accounts for any potential debts you'll leave behind. It also means ensuring that it's safe from estranged family members or business partners who feel they're owed something.
If there are errors in your estate plan — even spelling errors — you're leaving virtually all your assets wide open to disputes. This means creditors and other liens can lay a claim on your estate, or certain individuals can come out of the woodwork to contest the will and other documents. What's worse, your family will be the ones who must deal with this whole mess, and it can leave them without the very necessary financial support to continue on without you.
What Happens If My Estate Plan Becomes Invalid?
An estate plan mostly becomes invalid if the documents are created under the guise of fraud or "undue influence." This goes for both wills and trusts, although trusts are much more difficult to contest as substantial proof would be needed to prove that the testator was under duress when creating it.
However, a will can become invalid under the following circumstances:
It's a holographic will, meaning it was handwritten with no witnesses. These aren't typically recognized by most states as legal documents
You don't have the proper witnesses
You haven't officially destroyed any previous wills
There's insufficient testamentary capacity — meaning there wasn't enough mental competence to create the will in the first place (another reason why you want the help of an attorney)
It doesn't follow any of the state's provisions
So what happens when your estate plan becomes invalid? The short version of this is that your entire estate will be left up to the probate court to settle. Unfortunately, this means that your entire estate will become a matter of public record. The county court will assign someone to comb through your estate and assess its overall value.
From there, the courts will follow the Alabama Intestate Succession laws, which means your heirs may not receive the assets you intended for them to receive. It also means that other individuals who you intended to leave out of your affairs may receive some assets or have the ability to stake a claim on your estate. Lastly, it means that your family will end up having to pay more in court fees and potentially have to wait up to a year for the estate to be settled.
But Isn't DIY Estate Planning Cheaper Than Hiring an Attorney?
One of the primary reasons people are drawn to DIY estate planning is because it's presented as a way to save money. But, in reality, the mistakes you'll undoubtedly make using a DIY estate planning kit will end up costing you and your family a lot more money down the road.
Hiring an experienced Huntsville attorney to plan your estate may be costly upfront. Still, it will save you thousands of dollars in court fees, taxes, and much more. It'll also spare your beneficiaries from paying unnecessary taxes after you've passed on.
It's that simple
Hiring An Attorney Will Save You Money and More
The best way to save money on your estate plan and ensure that it's secure is to work with an attorney. Unfortunately, there are too many potential problems surrounding DIY estate planning tools, mainly because estate plans are essentially living documents. Laws change all the time, as does your life.
Your estate plan should always reflect a life and the laws in flux — and no amount of software can do that for you. For example, suppose a law regarding estate taxes in Alabama changes. In that case, your DIY estate planning template isn't going to call you to let you know. However, your Huntsville attorney will.
Your Huntsville attorney will also do the following:
Help you identify which assets should transfer into a trust and ensure you're able to fund the said trust
Advise you on making beneficiaries regarding who they are and the terms that will best protect their future interests
Assist you in choosing the right executors, trustees, POAs, and more
Will act as your executor, trustee, POA, etc. if needed
Will help you draft the conditions and contingencies for every document in your estate plan
Advise you on guardianship planning for any minor children or pets
Help you create a "pour-over" will to ensure the probate process is as minimized as possible
Be there for your family throughout the settlement of your estate to ensure all their questions are answered, and they receive any other needed support.
Guide you through all of the things you didn't know that you need to know about estate planning
Ultimately, finding an estate planning attorney in Huntsville, AL, who can answer all your questions and keep your best interest in mind is money well spent. After all, you can't put a price on peace of mind regarding your loved ones.
Get in touch with us today to set up a consultation with Sarah S. Shepard or another experienced Huntsville attorney to start planning your estate properly.