Costly Mistakes to Avoid in Creating a DIY Estate Plan

It's tempting to save money with a DIY estate plan. For real estate investors, doing your estate planning yourself is not ideal. Your estate is likely more extensive and complex than an online DIY estate plan covers. 

There are tons of tiny details and places to trip you up in estate planning. The number of elements and potential pitfalls make it a near-requirement for real estate investors to get professional help from an attorney. 

You wouldn't want to jeopardize your assets from a missed signature, would you? 

Below you'll find a definition of a DIY estate plan, problems specific to real estate investors, and some common issues plaguing people who plan without expert advice. 

What Is A DIY Estate Plan? 

Typically, a DIY estate plan is when a person completes their estate planning documents. 

Some examples of a DIY estate plan include: 

  • Filling out online documents
  • Typing or handwriting your forms and documents
  • Estate planning documents from an attorney in another state
  • Documents you copied from a family or friend

A DIY estate plan is a bit like Googling open-heart surgery and then performing it on yourself. Possible? Maybe, but unlikely. 

It's complex and needs a person with the expertise to conduct the transaction.

DIY Estate Plan: Unique Problems For Real Estate Investors 

The primary issue with a DIY Estate plan is that it's too general. The forms are boilerplate and meant to address as many situations as possible. The problem is that this approach is too broad. Your situation is specific and needs specific solutions. 

Suppose you own rental property in California, New York, and Texas. It happens; you die. You used a DIY estate plan, but maybe you didn't set up an LLC, a Series LLC, or a trust. 

When you die, your beneficiaries will likely go to probate:

  •  in the county of your primary residence  
  • in each county that you owned rental property

Each of those probate courts will cost money in court costs and attorney fees. Fees can run as high as 5% to 10% of the estate's value.  

DIY Estate Plan: Costly Mistakes

It might be cheaper to plan your estate without an attorney, but you will have to pay in the long run. Some common issues that arise from planning your estate by yourself include: 

  1. Failure to execute 
  2. Witnesses
  3. Failure to fund a trust
  4. Forgetting to include a contingent beneficiary

Failure to execute

Failing to execute a will might come from mistakes or an overlooked detail in the will. An estate plan is not one document but a variety of strategies and legal procedures you want to be executed when you die. 

There are plenty of websites and mobile apps that let you create a will or a revocable living trust. An online document you do for yourself might sometimes work, but a real estate investor has a more significant estate. That larger estate is more complex to protect and probably exceeds the scope of a DIY estate plan.

Every state has laws that govern the execution of wills. Typically, a will and other documents need to be signed in the presence of two people who don't have an interest in the estate. Failure to sign the will properly means it will be unenforceable, and the state decides how to divvy up your property via probate. 

Witness Issues

It happens all the time. A person dies, and long-distant family members come pouring out of the woodwork. Or families argue about the decedent's estate. Those family members may say that you, the deceased, were unduly influenced during the creation of the will. 

A DIY estate plan provides no witnesses on your beneficiaries' behalf that can attest to your state of mind when you created your will. It becomes a matter of "he said-she said" in the courtroom, and a judge might invalidate the will and let the court decide how to split up your estate. 

If you have an attorney who drafted the will, you have a better chance of winning. The lawyer can speak to your state of mind, and that testimony has weight because the attorney is an officer of the court. 

Revocable Living Trust

You've set a revocable living trust, and you think everything is all set. Then the day comes when you pass away. If you didn't adequately fund your trust, your family's nightmare is just beginning. 

A living trust is just a document that says the trust exists. For the document to matter, you have to fund the trust properly. That means you must retitle or transfer ownership of the assets you own to the trust. If you fail to fund your trust correctly, your family will be on the hook for hefty fees (up to 15% of the estate) because they will have to go through probate to execute the trust. 

This is a costly and time-consuming mistake.  

Importance Of A Contingent Beneficiary

Imagine that you've planned your estate and have named your wife as the primary beneficiary. You have all the paperwork lined up and ready to go if you die suddenly. That's a great start. 

What happens to your estate if you and your wife die in a car accident? 

The estate goes to probate, and the court determines how to split your assets. That might not follow the plan you have set forth. To combat this issue, you should name a contingent beneficiary. 

A contingent beneficiary is a person or entity next in line if your primary beneficiary dies or is incapacitated. You can name a contingent beneficiary on: 

  • Bank accounts
  • Investment accounts
  • Life insurance
  • Retirement accounts

Our list is not a comprehensive list of items that can have a contingent beneficiary, but it's an excellent place to get started. Almost anything you can name a beneficiary for, you can also name a contingent beneficiary. 

Key Takeaways

DIY estate planning is detailed and requires a professional touch, especially for real estate investors. You'll want to work with a knowledgeable estate planning attorney to 1make sure your estate doesn't end in probate. 

In the long run, it'll cost much less. 

Are you ready to speak with an expert? Learn about our comprehensive solutions you can use to achieve financial freedom, reclaim your time, protect your assets, and build your legacy. Book a FREE discovery call now.

Scott Royal Smith is an asset protection attorney and long-time real estate investor. He's on a mission to help fellow investors free their time, protect their assets, and create lasting wealth.

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