Is DIY Estate Planning Ever a Wise Move?

Is DIY Estate Planning Ever a Wise Move?

A regular reader emailed me recently, stating that she enjoyed reading my articles and was eager for me to comment about a particular, well-advertised legal software program. She wondered, as she thought many other readers would, about the “legalities of the … [software company’s] documents”, specifically Wills. She shared that she was single, with her primary asset being her home, and wanted to know if a will generated by this software, notarized, would be “enough to prevent problems and probate after she passes?”

I thanked her for writing to me and agreed that it would be a good idea to write an article on the subject. First, as most of you know who read my articles regularly, a valid Will (which, in itself, has a number of specific statutory requirements) is not enough to prevent probate. Without a revocable living trust, whether or not the above-referenced reader has a valid Will, a probate will be required on her passing. Most people are aware that avoiding a probate is generally desirable, and I often write about the many advantages of a living trust.

Let’s next address the more general question: is “do it yourself” (DIY) estate planning wise? My opinion is that in most cases, it is not. The inquiring reader I described, who evidently has some familiarity with this popular estate planning software, might well have purchased it, self-drafted and signed her Will, and figured all would be fine. Yet, on her death, the required probate would diminish her estate by $10,000 – $20,000 or more in attorneys’ fees and costs, and therefore reduce by that amount what her loved ones and/or favorite charities would receive.

I could literally write an article every month for the next several years just on trust and estate administration cases I’ve handled during the last 20 years in which problems, disputes and lawsuits were caused by DIY estate planning. People who engage in DIY estate planning frequently think: “I can do this myself; my situation is very simple.” The number and types of drafting “traps” is countless, but I’ll give one example below of how easy it is to create a serious potential problem out of what is perceived as a simple estate planning drafting task.

John Doe has a home worth $900,000, with a loan against it in the amount of $200,000. He also has cash accounts totaling $400,000. Without consulting or talking to anyone, John takes it upon himself to type up a testamentary document – Will or Living Trust – that states, in pertinent part: “on my death, my home is to go 100% outright to Betty Doe, my sister; and the rest of my assets go to Bill Doe, my brother.”

How can the document be any more clear, right? Wrong! John dies and his estate is being administered. Betty claims that John’s intention is clear from his testamentary document – Betty is to receive the $900,000 home “100% outright”, meaning mortgage-free. In other words, Betty demands that the $200,000 mortgage be paid off from John’s $400,000 cash accounts. This would result in Betty receiving the $900,000 home with no mortgage, and Bill receiving $200,000 in cash ($400,000 in the cash accounts minus the $200,000 used to pay off the mortgage).

I’ll bet you already know what Bill argues. Of course, he is adamant that John intended that Betty be distributed the house as John owned it; she would take over John’s obligation to pay the mortgage. So, Bill’s position is that he should receive the full $400,000 in cash.

Although it might be interesting intellectually to discuss whether Betty or Bill has a better legal position, the “take aways” should be: 1) Regardless of who will ultimately prevail, Bill and Betty could easily spend $50,000 – $100,000 or more on legal fees to resolve the dispute, not to mention the aggravation and damage to their sibling relationship; 2) Sadly, because John never communicated about this to anyone before he died, neither of his siblings know for sure what John intended; and 3) if John had hired an experienced estate planning attorney, the attorney would have discussed John’s intentions and drafted appropriate language to clarify those intentions (e.g. Betty shall receive the home “subject to liens and encumbrances”; or “free of liens and encumbrances”).

This article is intended to provide information of a general nature, and should not be relied upon as legal, tax, financial and/or business advice. Readers should obtain and rely upon specific advice only from their own qualified professional advisors. This communication is not intended or written to be used, for the purpose of: i) avoiding penalties under the Internal Revenue Code; or ii) promoting, marketing, or recommending to another party any matters addressed herein.

Mr. Silverman is an attorney with R. Silverman Law Group, 1855 Olympic Blvd., Suite 125, Walnut Creek, CA 94596; (925) 705-4474; rsilverman@rsilvermanlaw.com.

ESTATE LEGAL SERVICES: Need to find an estate planning attorney in Walnut Creek CA? Contact Robert Silverman at 925-705-4474 for legal advice on Revocable Living Trust, Wills, Durable Power of Attorney, Advance Health Care Directive, Special Needs Trusts, and Irrevocable Trusts & Advanced Estate Planning, including Irrevocable Life Insurance Trust (ILIT), Qualified Personal Residence Trust (QPRT), Defective Grantor Trust (IDGT), Grantor Retained Annuity Trust (GRAT), “Crummey Trust”, and various types of Charitable Trusts.

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