| Estate planning is an essential part of life and death. | | | | of the testator's signature and intent, in many |
| In planning for our future and our family’s future, | | | | jurisdictions, unwitnessed holographic Wills are treated |
| we must take stock of who we are, what our goals | | | | as valid and need only to meet minimal requirements |
| are, and how we want our estate distributed. With | | | | in order to be probated. |
| the easy availability of do-it-yourself Wills and Living | | | | Even if properly executed, a do-it-yourself Will may |
| Trusts, it can be all too tempting to take care of | | | | also take longer to probate because the judge may |
| your estate planning needs yourself, rather than pay | | | | question the process used in the drafting and |
| what may seem like high fees to an estate planning | | | | execution of the Will, requiring witnesses to appear in |
| attorney. | | | | court to attest to the validity of the Will. |
| You can easily go on the internet or the local office | | | | The Will or Trust you receive from an experienced |
| supply store, gather the necessary forms and | | | | estate planning attorney will be properly executed |
| information, spend a little of your time, and, presto, | | | | according to precise jurisdictional guidelines. |
| you have a Will or Living Trust. However, it is very | | | | Do-It-Yourself Kits Cannot Create Comprehensive |
| easy to overlook important legal and technical | | | | Estate Plans |
| planning points that can cause the estate or your | | | | Do you consider yourself to be |
| beneficiaries to pay unnecessary taxes, high fees to | | | | “run-of-the-mill” or “boilerplate”? No |
| attorneys or probate court, or can cause assets to | | | | one else does, either. One of the many pitfalls of |
| be distributed to the wrong people at the wrong | | | | do-it-yourself estate planning is that it is a one-size |
| time. | | | | fits all approach. Although they may provide some |
| What may seem like a great deal could cost your | | | | information and some amount of guidance, the Will or |
| estate and your beneficiaries tens of thousands of | | | | Trust cannot be tailored to your individual needs, |
| dollars (or more) in the long-run. All too often it’s | | | | goals, or concerns. Almost everyone has a condition |
| not just about the money… there is frequently | | | | or situation that requires a unique combination of |
| added anguish that family members have to endure | | | | estate planning tools. |
| in dealing with details you thought you looked after. | | | | Tax planning is especially complicated. Most people |
| In a case settled in 2005, a successful Washington | | | | don’t know how much money they can pass, or |
| businessman wrote his own Will assuming his assets | | | | eventually will pass, without paying taxes. |
| would be free of estate tax. However, due to the | | | | Here’s a relatively simple example: Say that in |
| language he used, the IRS interpreted the law | | | | 2009, you have more than $7 million in assets. If you |
| differently and claimed all the assets he passed to his | | | | simply leave your assets to your spouse, only the |
| wife were subject to $800,000 in estate tax plus | | | | first $3.5 million in assets is tax-exempt. The |
| $130,000 in back interest. His family went to court | | | | remaining $3.5 million would be taxed at a 45% rate, |
| and eventually won, but only after nearly ten years | | | | or $1,575,000. A tried and true strategy often used |
| of costly litigation and years of turmoil. | | | | in those cases is to create a Family Trust to provide |
| One of the biggest problems with do-it-yourself | | | | for your spouse and children and preserve applicable |
| software packages and forms is the lack of personal | | | | exclusions (the amount of assets that the first |
| advice. Although this software may be able to walk | | | | spouse to die can pass tax-free). |
| you step-by-step through a form, it can never | | | | It can get even more complicated. A Family Trust |
| provide the advice that comes from an experienced | | | | can also provide protection from an additional layer of |
| estate planning attorney. | | | | tax if you make bequests to grandchildren. Plus, |
| Experienced estate planning attorneys do not create | | | | there are complex rules regarding property you give |
| a boilerplate Will or Trust. Instead, they can help you | | | | away over your lifetime. Do-it-yourself kits are |
| create a customized, individualized estate plan based | | | | simply not designed to cover all possible financial and |
| on an in-depth discussion about your current financial | | | | taxation situations. |
| situation, your future plans, and your intentions once | | | | Blended family situations can also create difficulties. If |
| you pass away. In fact, many of the software | | | | you have children who are not adopted, using the |
| packages and other do-it-yourself resources have a | | | | language, “…to my children…,” in a |
| strong disclaimer that says they are not a substitute | | | | bequest may result in those children being left out of |
| for legal advice and to consult an attorney for help in | | | | your estate unless they are specifically named; and, in |
| understanding how the law may apply to your | | | | some cases, a contest between your children over |
| particular situation. | | | | who should be included which, of course, creates |
| A comprehensive and effective Will or Trust is based | | | | great family disharmony. |
| on asking all the right questions and taking your | | | | But Wait, There is More… |
| individual needs into account, something no software | | | | Also keep in mind that IRA, 401(k), and life insurance |
| or form can do. How can you even know if you | | | | designations can create further complications. If |
| need a Will or Trust? There are substantial | | | | your Will bequeaths an IRA to a child but your |
| differences in those two tools and oftentimes a Will | | | | spouse is the beneficiary, the IRA will pass to the |
| and a Trust need accompanying documents to make | | | | spouse regardless of the intentions expressed in the |
| the plan work exactly as you’d like for it to. | | | | Will. Effective estate planning is a comprehensive |
| When is a Do-It-Yourself Estate Plan Insufficient? | | | | and thorough process. Errors or ineffective planning, |
| We could easily argue, “Always!” But | | | | incurred now by the use of do-it-yourself kits, could |
| let’s be more specific. Do-it-yourself kits cannot | | | | cost your heirs tens of thousands of dollars when |
| adequately cover your needs if, for example: | | | | you are gone. |
| - You own property | | | | An experienced estate planning attorney will do more |
| - You own a share in a small business | | | | than help you properly structure your estate plan to |
| - You wish to disinherit your spouse or child | | | | limit the impact of taxes and disputes, and pass on |
| - You wish to leave money to your grandchildren but | | | | your assets. They will not only draft your Will, but |
| not your children | | | | also critical estate planning documents such as a |
| - You are married and you and/or your spouse have | | | | Revocable Living Trust, Durable Power of Attorney, |
| children from a previous marriage | | | | Health Care Power of Attorney, a Living Will, and |
| - You wish to arrange long-term care for a disabled | | | | HIPAA Release creating an effective and |
| beneficiary | | | | comprehensive estate plan. |
| - You have minor children | | | | And When Things Change … |
| - You have investments, including an IRA or 401(k) | | | | One of the biggest mistakes do-it-yourselfers make |
| - You’re worried about young or irresponsible | | | | is that they don’t keep their estate plan current. |
| beneficiaries making foolish financial decisions with | | | | They fail to realize that creating an estate plan is |
| their inheritance | | | | just the first step in the estate planning process. You |
| - You have a potentially taxable estate, over $1 | | | | will want to review your plan periodically to make |
| million per individual | | | | sure it accurately reflects your current goals and |
| - You would like to include creditor or divorce | | | | requirements. Chances are your personal and |
| protection for your beneficiaries | | | | financial situation will change as years go by. |
| - You share property with someone who is not your | | | | A do-it-yourself kit cannot periodically review and |
| husband, wife, or legal partner | | | | update your plan in case of: |
| - You fear a challenge to your Will | | | | - Marriage |
| What can happen in situations like those listed above? | | | | - Divorce |
| In one instance, a stepmother used software to | | | | - Birth or adoption of children |
| leave everything to her “children.” | | | | - Illness or incapacitation |
| Unfortunately, the state law said she didn’t | | | | - Changes in your intentions |
| have any children because she had never legally | | | | - Changes in tax or non-tax laws |
| adopted her stepchildren. As a result, it cost them | | | | - Inheritance |
| more than $100,000 in legal fees to claim their | | | | - Change in assets |
| inheritance. | | | | - Change in residence |
| In another case, a grandfather used software he | | | | - Death of family member |
| purchased to name his grandchildren as heirs instead | | | | Even a recently established estate plan may require |
| of his children. Skipping a generation allowed the IRS | | | | revision if major life or financial changes occur. And if |
| to tax his assets twice, and the grandchildren only | | | | your personal situation hasn’t changed, changes |
| received 20% of a $100 million estate. He thought | | | | in federal or state laws can still affect your plan, |
| he was being tricky but the IRS has a lot of tricks up | | | | which may cost you thousands of dollars by not |
| its sleeve – even for smaller estates. | | | | taking advantage of new regulations. |
| It’s All in the Execution | | | | Where There’s a Great Will… There’s a |
| Even a simple estate plan can run into trouble if all | | | | Great Way |
| the rules aren’t followed. For example, a Will or | | | | If you don’t have a Will or a Trust, your state |
| Trust is not considered valid unless it has been | | | | of residence has prepared a plan for you. The |
| properly executed according to state law. Some | | | | distribution of your assets will be based on the |
| states require two witnesses for a Will. Others | | | | state’s intestacy laws. While having an estate |
| require three witnesses, all of whom must be | | | | plan can be better than having no estate plan at all, |
| present at the time the Will is signed. And if one of | | | | your plan should precisely express your intentions. |
| those witnesses is also a beneficiary (like, for | | | | Your estate plan should carry out your wishes |
| example, your spouse), that witness could be | | | | precisely as you intend. An effective estate plan will |
| disqualified from receiving any assets distributed by | | | | provide financial stability to your spouse, children, or |
| your Will or Trust. | | | | other beneficiaries, protect your assets for future |
| Some states allow a holographic Will, which is a Will | | | | generations, ensure your wishes are carried out, and |
| you write entirely by hand. Although normally a Will | | | | protect the privacy of your loved ones. |
| must be signed by witnesses attesting to the validity | | | | |