While the attraction of simplicity and low cost of do it yourself estate planning are appealing, the results are all too often disastrous, affirms Insurance News in the article “Mind Your Mouse Clicks: DIY Estate Planning War Stories.” The increasing number of glitches that estate planning attorneys are seeing after the fact has increased, as much as the number of people using online estate planning forms. For estate planning attorneys who are concerned about their clients and their families, the disasters are troubling.
A few clumsy mouse clicks can derail an estate plan and adversely affect the family. Here are five real-life examples.
Details matter. One of the biggest and most routinely made mistakes in DIY estate planning goes hand-in-hand with simple wills, where both spouses want to leave everything to each other. Except this typical couple neglected something. See if you can figure out what they did wrong:
John’s will: I leave everything to my wife Phyllis.
Phyllis’ will: I leave everything to my wife Phyllis.
Unless John dies and Phyllis marries someone named Phyllis, this will is not going to work. It seems like a simple enough error, but the courts are not forgiving of errors.
Beneficiary mistakes. We had a woman come to us to probate her husband’s will, which left everything to her. However, all his retirement benefits were payable on death to his ex-wife.
The husband may have believed that the will controlled those benefits. That would only be true if there were no living beneficiary.
The ex-wife received the retirement funds.
Incomplete documents. Ellen created an online will leaving her entire probate estate to her husband. It was fast and cheap, and she was delighted. However, she forgot to click on the space where the executor is named. The website address for the website company is the default information in the form, which is what was created when she completed the will. The court is not likely to appoint the website as her executor. Her heirs are stuck, unless she corrects this, hoping the court will understand. Hope is a terrible estate plan.
Letting the form define the estate plan. Single parent Joan has a 6-year-old son. Her will includes a standard trust for minors, providing income and principal for her son until he turns 21, at which point he inherits everything. Joan met with a life insurance advisor and applied for a $1 million convertible 20-year term life insurance policy. It will be payable to the trust. However, her son has autism and receives government benefits. There are no special needs provisions in her will, so her son is at risk of losing any benefits, if and when he inherits the policy proceeds.
Don’t set it and forget it. One couple created online wills when the estate tax exclusion was $2 million. They created a credit shelter, or bypass, trust to reduce their estate taxes, by allowing each of them to use their estate tax exclusion amount. However, the federal estate tax exclusion today is $11.4 million per person. With $4 million in separate assets and a $2 million life insurance policy payable to children from a previous marriage, the husband’s separate assets will go into the bypass trust. None of it will go to his wife.
Even for people who have hired an attorney, the planning may not fit anymore due to the significant changes we have had in our tax laws.
Families need help implementing plans. Don’t forget that the family will need help implementing the do it yourself estate plan when the time comes. Selecting an estate planning attorney is important so that the right guiding hand is available when the plan needs to be used.
Do it yourself planning can tarnish your legacy of being a competent and thoughtful person. Is it worth the risk?
An experienced estate planning attorney who is licensed to practice in your state is the best source for creating and updating estate plans, preparing for incapacity, and ensuring that tax planning is done efficiently.
Reference: Insurance News Net (Sep. 9, 2019) “Mind Your Mouse Clicks: DIY Estate Planning War Stories”