Why You Should Not Let Your Clients DIY Their Estate Plan

I wrote a newsletter on the perils of do it yourself (DIY) estate planning. I have seen quite a few of these over the years. I have worked with clients who paid hundreds of dollars to use an online platform. Sadly, the documents would create nothing but chaos and heartache for their families. Happily, I am here to help.

The biggest errors I see are people not naming loved ones because they “can’t handle the money.” Instead of providing for a loved one by using a trust, even a trust that specifically addresses issues like substance abuse or mental illness, the client had no idea that this was even a possibility. I also see people leaving a percentage of their estate to charity, not understanding that different assets receive different treatment on death and posthumous charitable giving needs to be considered carefully.

I have yet to see a “funded” DIY estate plan. Real estate, brokerage accounts, life insurance policies – none have been addressed. While a good attorney can petition the court to ask that assets be transferred to the trust after death, there are no guarantees and this can be an expensive process, especially if contested.

But perhaps my biggest concern is insufficient incapacity planning. The durable powers of attorney generated by DIY online form providers are typically bare bones and usually name only one agent. It is unlikely that a financial institution would accept such a document – and there we are back in court asking a judge for authority to act. The health care directive may not include HIPAA waiver language, rendering it useless in some circumstances. These forms also generally fail to address a long term incapacity, gender presentation issues, the exclusion of certain persons, and religious and faith considerations – all issues that can leave family members distraught and confused over what to do.

Online forms give laypeople a sense of security. And when they hear that I use drafting software they may think “oh, then it is so simple anyone could do it.” My WealthCounsel software is anything but simple. Almost every paragraph in a well-crafted trust relates back to a story of a family in turmoil who had to resort to the courts to settle their disputes.

If your clients tell you that they have an estate plan, be sure to ask how they got it done and for a copy of their certification of trust. Terrific financial advisors, wealth managers, CPAs, and insurance agents can be a wonderful “second set of eyes” to ensure that a client with a revocable trust has transferred assets to their trust and has named the trust as the beneficiary of their life insurance policies.

I am always here to answer questions and for collaboration.

Published in AAC