This year thousands of people will bypass lawyers and will use online tools to create their own wills, powers of attorney and other estate planning documents. People with relatively straightforward needs (ex: an individual with no children and few assets) might find that these programs do the trick. However, the reality is that these online forms attempt to plug unique situations into a one-size-fits-all legal document. Since no two families are identical, these documents leave a lot to be desired. People with complex family situations (such as children from different marriages) or great wealth are especially advised to seek out the professional help of an estate planner.
The dangers of DIY estate planning documents
Certain mistakes can invalidate your will
Online retailers, such as LegalZoom, sell form wills that contain generic instructions for all 50 states. While the actual document might contain the basic nuts and bolts of a last will and testament, it cannot advise you on key state-by-state differences. For example, in North Carolina a will is only binding once the testator signs it in the presence of two witnesses. However, companies like LegalZoom will not inform you of the witness requirement or who is qualified to serve as a witness. This error would result in your will being invalidated. Having died without a proper will, a probate court would administer your estate and local law would determine who receives your assets. Similarly, if the will doesn’t have the appropriate supporting affidavit from the witnesses and notary, then at the time of your death, your family may be required to locate the original witnesses in order to establish the validity of the will.
DIY Will Programs Can Be Too Flexible
Flexibility in the will making process can actually work against you sometimes. For example, LegalZoom and RocketLawyer both allow you to edit your completed will. You are given the opportunity to put anything you wish in the special directives box. This feature could lead you to self-create clauses that contradict other elements of your will.
Shockingly enough, these companies are not required to inform you of your error. This is because their terms and conditions clearly state that they are not legal advisors; thus, they have no authority or responsibility to inform you of the mistake. In our office, we’ve seen all sorts of errors created by this online wills, including accidentally omitting a surviving spouse or other key family members.
Estate taxes Are Complicated
Currently, the estate tax exemption is over $11 million. But these rules are constantly changing. This constant variation in the estate tax rules is difficult for seasoned attorneys to keep up with, let alone people lacking professional help. While they may not have a crystal ball telling them what will happen with the tax code in the future, an estate planning attorney can help you draft your plan to hedge against future changes in the estate tax laws.
Additionally, most DIY will kits do not allow you to create tax-saving entities, such as a trust. The program will automatically create the same estate structure for someone with $10,000 in assets as for someone with $10 million in assets. This oversight can result in your estate owing substantially more taxes than if there was consultation with an estate planner. And even if the kit does include potential tax planning provisions, typically those provisions will ultimately wind up not working if you don’t properly understand how your estate plan interacts with your financial planning. A thorough estate planning attorney should review your assets with you and advise you how to properly set up the titling and beneficiary accounts on your account so that your plan will work as expected.
As sophisticated as a piece of online software may be, it is no substitute for an experienced professional who practices estate planning and elder law in the real world every day. It doesn't sit down in front of clients to find out what their goals are to understand their vision for their family's future. It doesn't look for opportunities to preserve assets from nursing home costs or wealth wasting in future generations. In short, you could be missing out on protecting tens of thousands of dollars tomorrow in order to save a few hundred dollars today.
“But what about attorneys affiliated with LegalZoom and LegalShield?”
A little-known secret about DIY document services is that one of their primary business areas is marketing for the legal services industry. It seems they are well-aware of how limited their software is.
Once you get to the point where you realize you’re in over your head, they will offer to refer you to an attorney. Often the attorney has agreed to review the form documents for a set flat fee, and some of that fee goes back to LegalZoom or LegalShield for the service of bringing in the new client.
The issue with this is that the rates offered to attorneys to review these documents are extremely low. In order to sustain a law firm on this type of work, the review would either have to be bare bones, or it’s a setup to an upsell.
Some attorneys see this type of work as a good way for brand new attorneys to jumpstart their careers and get some experience fresh out of law school. Some attorneys have moral uneasiness about participating in an arrangement that entices clients with one service in order to lead them to another. In any case, I would make extra sure you get what you’re looking for by using the values-based approach for vetting your attorney that we present later on in this book.
By the way, keep in mind that this is also how many “pre-paid legal plans” offered by some employers work.
But some lawyers love LegalZoom: I frequently come across articles by attorneys who make more money cleaning up DIY messes after the fact than they would have gotten paid to do it right the first time.
Is it really worth risking your family's future?
Have additional questions or concerns?
Carolina Family Estate Planning can answer all of your questions and concerns. Please give us a call at (919) 443-3035 for a free phone consultation or contact us online. At the end of the call, you’ll know the next step and at a minimum, we’ll point you in the direction of resources that can help you.
Attend a seminar!
Carolina Family Estate Planning also offers free, workshops for individuals in the Raleigh-Durham area. The workshop will cover estate planning & long term care planning, and will include information about protecting your family from taxes, nursing home expenses, probate, etc. You can find more information here.