Online estate planning services make creating a Will or Trust look simple. For some people, the convenience and lower upfront cost can be appealing. he problem with online estate planning however is that you may not know what your estate plan is missing or whether it will work as you intended until it is too late to fix it.
Before relying on a DIY or online estate plan, consider some of the risks that may not be obvious when you click “complete.”
Risks Of A DIY Estate Plan
Risk #1: You Don’t Know What You Don’t Know.
Perhaps one of the greatest limitations of DIY estate planning is that the process relies heavily on you to recognize which issues are important. An online questionnaire can ask whether you are married, have children, or own real estate. But your answers may raise additional legal and planning issues that are not easily addressed by standardized questions.
Risk #2: Your Documents May be Legally Correct – But Your Estate Plan May Still Be Wrong.
One of the most important distinctions in estate planning is the difference between documents and an estate plan. A document can be properly drafted and still produce an unintended result if it does not fit your particular circumstances.
For example, a Will may say that your assets pass equally to your children. But what happens if most of your wealth consists of retirement accounts and life insurance naming different beneficiaries? Wills can only control assets passing through probate and most estate planning these days is designed to avoid probate.
A Trust may contain appropriate provisions for your children. But what happens if the assets you intended to pass through the Trust were never properly coordinated with it?
Effective estate planning requires looking at the entire picture — not simply whether the language in an individual document is technically correct.
Risk #3: Your Assets and Estate Plan May Not Be Working Together.
One of the most common estate planning misconceptions is that once you sign a Will or Trust, your assets will automatically pass according to those documents. Unfortunately, it is not that simple.
A Will generally controls assets that pass through your probate estate. Many commonly owned assets, however, may pass outside of probate based upon how they are titled or the beneficiary designation on the account.
This means you could have a properly drafted Will stating that your estate should be divided equally among your children, while your beneficiary designations or account ownership result in your assets being distributed very differently.
The same problem can arise with a Revocable Living Trust. One of the primary reasons many people establish a Trust is to avoid probate. However, simply creating and signing a Trust does not automatically accomplish that goal.
Assets intended to pass through the Trust must be properly coordinated with it. Depending upon the type of asset, this may involve transferring ownership to the Trust, recording a new deed, or coordinating beneficiary designations with the overall estate plan.
If significant assets remain in your individual name without another method of transfer, your family may still need to go through probate — even though you created a Trust specifically intending to avoid it.
Risk #5: A Small Mistake Can Have a Large Impact.
Estate planning documents are intended to govern important financial and personal decisions — sometimes decades after they are signed. In many cases, small drafting decisions can have significant consequences.
Estate Plan Errors That Can Lead To Negative Consequences
Below are some real-life examples of estate plan drafting or execution errors that resulted in a significant, but unintended negative consequence:
- A Will did not include the specific authority to sell real estate property that Massachusetts Real Estate Law requires resulting in family members having to obtain a license to sell from the court before the property could be sold.
- The dispositive provisions in the Will were vague, which resulted in the court requiring a separate hearing to construe the Will.
- The dispositive provisions in the Will were designed poorly when the individual told the online Will drafting software to “give all my accounts in Bank A to charity and all my accounts in Bank B to my family” never contemplating that Bank A would merge into Bank B prior to their death: the Will never should have been drafted that way.
- A trust amendment attempting to include provisions to minimize estate taxes missed an important drafting component which caused the tax savings provisions to fail.
- Assets that should have passed to the surviving spouse named a prior girlfriend as beneficiary.
- An irrevocable trust did not contain the appropriate legal language resulting in the assets becoming countable assets when the applicant entered into a nursing home.
- A Health Care Proxy did not include specific legal language that resulted in the family having to file for a Guardianship through the probate court.
Standardized documents often lack important provisions and legal requirements necessary to reach your intended goal. Thus, these standardized forms may not adequately address the nuances that are important to your family.
Risk #6: Your Estate Plan Documents May Not Be Properly Executed.
Having the right document is only part of the process. It must also be properly executed. Massachusetts law imposes formal requirements for the execution of a Will. Other estate planning documents may also have particular signing, witnessing, or notarization requirements.
Often times these mistakes during execution may not become apparent until years later. When an attorney supervises an estate planning signing, the goal is not simply to obtain signatures. It is to ensure that the appropriate formalities are followed so that the documents are effective and hold up well against potential future challenges.
The worst example of this we have ever witnessed was an individual who signed an online Will leaving their $700,000 home to their sister. The Will was technically correct, containing all required provisions. However the sister was one of the two witnesses to the Will when they signed it at a local bank. As a result, the bequest failed and the house went to other family members.
Risk #7: You May Not Discover the Problem Until It’s Too Late.
This may be the most significant hidden risk of all. Unlike many legal documents, an estate plan may not truly be tested until the person who created it has died or become incapacitated.
At that point, the person who understood what was intended may no longer be available to explain it—or correct it. A mistake that saved money during the planning process can potentially result in probate proceedings, additional taxes, family disputes, legal fees, delays, or an inheritance passing differently than intended.
The true cost of an estate plan therefore should not be measured only by what it costs to create. It should also be measured by how well it works when your family eventually needs it.
Why Choose Herbst Law Group?
At Herbst Law Group, we are dedicated to providing comprehensive estate planning that transcends merely preparing documents. Our goal with every client is to create a comprehensive estate plan that reflects your family, your assets, your concerns, and your long-term goals.
Through our extensive work in estate and trust administration, we also have the unique perspective of seeing how estate planning documents operate in practice. This is because our representation does not end with planning. We also regularly represent Personal Representatives, Trustees, and families after someone has died, helping them interpret and administer Wills and Trusts, navigate the probate process, address tax and asset issues, and ultimately carry out the terms of an estate plan.
We see which provisions provide clear direction for trustees and personal representatives. We see where flexibility built into a trust can help a family respond to unexpected circumstances. We see how certain will or trust provisions can impact how the will and trust are administered. And we also see how unclear language, incomplete planning, or assets that were never properly aligned with the estate plan can create unnecessary expenses, delay, confusion, or conflict.
By combining our experience in estate planning, estate and trust administration, probate, tax planning, and elder law, Herbst Law Group approaches estate planning with the end result in mind. This difference is at the heart of comprehensive estate planning.