The time has come when parents around the country are gearing up to tackle all of their "responsible parent" financial resolutions, and at the top of that list is estate planning. First, a word about why estate planning is at the top of the list: Every good financial advisor, CPA, or lawyer knows that good investments and income-tax saving strategies are completely useless if your lack of planning leaves your family in a huge mess if you die or are incapacitated. So, before you pour your energy into planning for retirement or wealth-building, you must plan for how your family will survive if you die or are incapacitated.
Second, a word about parents and estate planning: If I could do one thing as an estate planning attorney, it would be to help parents reframe the way that they THINK about estate planning. For most parents, the way they think about it is, "I need a simple will," "I don't have a complicated situation," "I don't have much in the way of assets," and, "How much does a will cost?" I would like to change all of that. I would like parents to think, "I need to know what I need to know about doing the best I can to make things as easy as possible for my family if something happens to me."
Unfortunately, many parents these days are turning to DIY estate planning, because they are thinking in terms of, "I need a simple will. How much does it cost?" To help you to avoid thinking in those terms, I have put together 4 Reasons Why DIY Estate Planning is a Terrible Idea:
1. You Don't Know What You Don't Know About What You Need.
Just about every parent that I see has no idea what types of situations their family faces if something happens to him or her. The examples are too numerous to cover adequately, but here is a small sampling of issues parents had (and we're talking about your normal, average parent who owns a home, a retirement account, and some life insurance, but does not feel wealthy by any means), but had no idea about: thousands of dollars would be owed in estate taxes, thousands of dollars would be owed in state inheritance taxes, thousands of dollars would be spent on probate, the court process would take months to complete, children could go into foster care, children could be accidentally disinherited, children could be sent to live with unsuitable guardians, and that's just a small sampling. The point is, when you go to prepare a DIY will, you skip the part where a lawyer looks at your family and asset information and spots issues that may arise. If you are going to DIY, you should at least see an attorney before that so you can find out what things will look like for your family if something happens to you.
2. You Don't Know If You've Screwed Anything Up.
When you DIY your estate plan, you will never find out if you have screwed something up. That will be left for your family to discover. In one example I saw, a woman prepared a will on Legal Zoom, and she shared her testimony on their website. She said that she prepared a will so that she could "avoid probate," but if she had her plan and goals reviewed by a lawyer, she would have learned that a will does not avoid probate - in fact, it guarantees that your estate will go through probate. In another example, a man accidentally disinherited his child by leaving everything to his wife (who was not the child's mother). The thing is, this can happen to anyone. Just about everyone who DIYs their estate plan is going to leave everything to their spouse. Then if the spouse remarries, they will probably leave everything to the new spouse, disinheriting the children.
3. Your Family May Not Be Able to Find Your Documents.
A common problem for people who DIY an estate plan or have it cheaply prepared by a lawyer who does not keep in touch with the family is that the documents are unable to be found when they are needed. I just got a call last week from a family searching for a stepmother's will. Guess what - the stepmother had mentioned that she provided for her stepdaughter (who she had essentially raised) in her will, but no one could find it, so the stepdaughter got nothing. Every month, in the back of my Oregon State Bar Bulletin, I see ads that people have put out, looking for the will of the deceased. Your family should know your lawyer's contact information and know exactly what to do if something happens to you. That is one of the most important aspects of creating a plan.
4. Your Family Will Have to Hire an Attorney in a Time of Distress.
Your estate will have to be settled at some point, which means that your family will have to hire a lawyer. Imagine your family having to choose a lawyer during such a distressing time. They may be desperate to hire anyone so that they can close things up and get access to money they need to survive. While they should be grieving and turning to a trusted advisor for help with legal matters, they will have to be judging whether a lawyer is competent, trustworthy, and likeable. Leaving a trusted advisor for your family to turn to is a priceless gift that you should arrange while you are alive and healthy. That way, your family can have the space to grieve and try to move on with life.
I have given you 4 Reasons Why DIY Estate Planning Is a Terrible Idea, and there are dozens more. Ask yourself, "How can I make things as easy as possible for my family if soemthing happens to me?" Then, call an estate planning attorney and ask him or her the same question. You will be well on your way to setting your family up with a lifetime of security and guidance.
Happy Holidays & a toast to your family's health & prosperity,