D.I.Y. Estate Plans: 3 Common Mistakes
Normally when you think “Do It Yourself” you might imagine painting your house or a trip to the store. But now you can also plan your own estate from the comfort of your own home. Thank the internet. Not only is this cheaper, but it’s also more convenient.
However, this increase in affordability and convenience has caused disasters for many families. “Do It Yourself” estate plans often fail to provide the kinds of benefits and protections that you would get in a well drafted and planned estate.
And I’m not just saying that because I’m an attorney!
Here’s 3 of the most common mistakes found in DIY estate plans:
Improper signatures & witnesses in wills.
Most states require the signature of the person creating the will as well as two witnesses to the will. The only exception to the two witness requirement in most states is hand written wills.
Failure to adhere to the signature and witness requirements invalidates the entire will. It doesn’t matter how good it looks or how many terms you included, if the signature and witness requirements are not followed then the will is invalid.
Failure to fund the trust.
Many people who create a revocable living trust (AKA a “trust”) on their own don’t fund the trust with the assets from their trust. Funding a trust means that you actually put the assets you want to be controlled by the trust in the name of the trust.
Let’s say you want your home to be subject to the terms in your trust. To do this you would need to deed the home out of your personal name and into the name of the trust.
If the property is not deeded into the trust it falls outside the trust terms and your heirs will need to go to probate court to get a judge to approve any transfers of title to the property following your death.
As for stock or LLC ownership, those need to be transferred into the trust. And for insurance, investment, and savings accounts, those should be put in the trusts name or the trust should be listed as a beneficiary.
Note: Failure to properly fund your trust will lead to your heirs going to probate court.
The General Forms May Not Address Your Unique Situation.
Most families have at least one unique situation to their estate that is not covered by standardized documents found on the web.
One situation that would be hard to deal with in a will is when you have a child who is financially irresponsible while the rest of your children are not.
Or, maybe you have an estate that has more debt than assets, in which case you would need to structure your estate plan to leave as little money as possible to the creditors.
More “unique situations” include you having assets in multiple states or being married to a spouse with children from a prior marriage.
The list could go on and on but these unique situations are rarely handled properly when you’re doing your estate plan on your own.
My suggestion is that, if you’ve completed an estate plan the DIY way, consider at least having a lawyer look at it to make sure what you have down is correct in the eyes of the law. Doing so will probably save your heirs and family a few court dates.