Why Self-Help Is a Recipe for Estate Planning Disaster

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Many people who decide to prepare estate planning documents consider a range of self-help options. Admittedly, the market is glutted with DIY alternatives for estate planning, such as software programs, online legal document services, paralegals, typing services, and pre-printed forms from stationary stores to name a few examples. Although the price associated with these DIY options can seem appealing, the ultimate cost can be disastrous in terms of frustrated intentions, avoidable tax liabilities, and increased estate administration costs incurred because the documents are not drafted properly.

Estate planning is a complex area of practice that requires knowledge of many areas of law, including property law, tax law, health care law, family law, probate law, real estate law, and more. Given the complex nature of estate planning, pro-forma solutions built on boilerplate forms is an extremely risky proposition. This blog highlights a number of common self-help traps that an experienced Virginia Beach estate planning attorney can assist clients in avoiding an estate planning disaster.

Failing to Engage in Proper Planning

Without legal representation, many people draft a simple will or a skeleton type living trust though the document does not fit their legacy succession needs. When a strategy is not employed to develop a comprehensive estate plan, key needs are often overlooked, such as a durable power of attorney that authorizes someone to manage your financial affairs in the case of incapacity. When developing an estate plan becomes a matter of filling in blanks on a pre-printed form or typing in responses to generic computer prompts, the actual ‚??planning‚?Ě part of creating an ‚??estate plan‚?Ě is overlooked. While you might decide a living trust is preferable to a simple will, for example, this does not mean that you do not need a will at all. Even if you construct your estate plan around a living trust, you still need a pour-over will that provides instructions for distribution of any assets that are not transferred to the living trust.
Lack of Nuance and Awareness of State Law

Although much of the language in a certain category of estate planning documents might be similar, the language needs to be carefully tailored to meet your unique situation, including your specific assets, family structure, intentions, and other factors. If a template is used that does not allow for significant customization to fit your unique circumstances, your assets may pass to the wrong individual, or the document could be vulnerable if it is contested. Further, every state has specific requirements in terms of the substance, formalities and enforcement of various types of estate planning documents. If you rely on cookie cutter DIY estate planning documents, there is a risk that your estate planning devices might run afoul of state law. If you make a living trust the foundation of your estate plan to avoid probate, you might force your loved ones to deal with the additional cost, delay, and lack of privacy associated with probate proceedings if the trust is not properly set up.
Transferring Real Property to a Minor

While many parents or grandparents elect to leave a significant portion of their estate, including real property to minors, this is a process that must be done carefully. Execution of a quit claim deed to a 12-year-old grandchild is not advisable. This approach can result in your grandchild being saddled with a hefty gift tax liability, but there are ways around this trap for the unwary. Since minors cannot legally execute contracts, simply deeding a home over to a minor means that the owner of the property lacks the legal ability to execute a contract to secure a mortgage on the property or execute a sale to a third-party. The bottom line is that careful planning is needed when leaving assets to minors.
Lack of Follow Up

Many people think that estate planning is a one-time process involving the drafting of documents. Contrary to this belief, estate planning is an ongoing process. If you experience a significant life event like a divorce, the birth of a child, incapacitating injury, or remarriage, you might need to significantly revise your estate planning documents. Similarly, there are steps that must be taken to fully implement estate planning devices that go beyond document preparation. One of the most common errors among DIY estate planners involves failing to fund a living trust. The process of funding a trust essentially refers to the process of undertaking the necessary procedures to transfer assets into the trust. When someone fails to properly transfer assets into the trust, the asset might need to be handled through the probate process, which can defeat a key reason for establishing the trust.

Linda Shin
About Linda Shin

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