DIY Estate Planning (and When You Need Legal Help)

When you really sit down and start to think about planning out your estate, you soon realize the headaches that can come along with it. Lawyers charge a big fee, but it’s important to make sure that everything is set up correctly. Fewer and fewer people are spending their money on estate planning help, and are opting to do it themselves or to not have any legal documentation at all. There are many online resources available to you if you choose this route, but it’s important to recognize when you’re in over your head and seek help from the professionals. You don’t want to leave your family in a bad financial situation later by saving some money now!

DIY Estate Planning

There is nothing out there that says you can’t plan your estate out yourself. In fact, you can easily access many books, software, and websites that get you the documents and knowledge to use them for free or for a much smaller price than using a lawyer.

In most situations, doing some DIY estate planning on a smaller budget is better than doing nothing at all. Should you pass away without a will and testament, state law will determine how most of your belongings are handed out, and the results may not match what you wanted. Check out this blog if you want more information on how that situation works. If nothing else, it’s certainly better to have simple living will and medical power of attorney forms set up before you are wheeled into an operating room, even if there has been no lawyer consulted.

Estate Planning Complications

While these forms may be easy to write up and print from a reputable website, there can be things that an average person would not think may go wrong when setting up these legal documents without a lawyer’s help. One of these mistakes may cost your heirs more than you saved in the legal fees in the long run.

If you are married, own a home, have kids, or other factors can add some complications to your estate planning and contribute to the possible mistakes in your documents. If you are worried about the estate tax charged for people who leave behind more than a million dollars, it may be in your best interest to at least consult with an attorney before you write anything up, as each state has a different process for this tax before the federal tax is added in.

Keep in mind, as you are setting up your DIY estate planning, that most lawyers also rely on software to keep track of these documents and reduce the chance of mistakes. Look around for one that helps you prepare the documents at a relatively low cost.

Estate Planning Documents and Professional Assistance

As you shop around in preparation to plan your estate, here are five important estate planning documents that can be a low-end cost to you even when you have a legal pro help you prepare them. Depending on your situation, these can be tricky documents that can be set up incorrectly if not checked by a professional.

Basic Will and Testament

At the base of every estate plan, your will should transfer your assets, appoint a guardian for any minor children, and name an executor to your estate who will hand out your belongings as you see fit after you are gone.

Having an attorney help you with this document may be a good idea, as this can be the document that will have the most trouble spots that only an experienced lawyer would be able to spot. For instance, if there is a special needs child, some software programs will tend to dis-inherit this child if you answer a question a certain way. If you have stocks you want to equally share between children, there is a certain way to go about handling that in a will that may be best left to a legal professional to ensure correctness.

Irrevocable Life Insurance Trust

An irrevocable life insurance trust is created so that you own a life insurance policy that becomes part of the taxable estate. Your heirs can own insurance directly on your life without using a trust, but not if those heirs are minors.

This is a trust that requires a very careful plan. You can add money in the trust to pay the insurance premiums using the annual exclusion, but that annual gift must be of a “present interest.” This means that it is something that the recipient can use right away. The beneficiaries of a trust like this are usually given ‘Crummey powers’ (right for a limited time to withdraw all the money from the trust). For these powers, a lawyer could write up a sample letter for the beneficiary called a Crummey notice in order for them to get the trust money.

To speed up this process with a lawyer, make sure you already have your first and second beneficiary ready so that the guesswork is already done.

Durable Power of Attorney

A durable power of attorney appoints a trusted family member or advisor to act on your behalf in legal or financial matters if for some reason you cannot.

A lawyer can help you quickly determine which rules apply to this in your state. If you own real estate in more than one state, you may need a power of attorney for both. They can also help you determine which powers should be included and when the document should take effect.

Health Care Proxy

This can also be known as a health care agent or health care power of attorney. A health care proxy will authorize someone to make medical decisions on your behalf if you are unable. Similar rules apply for an attorney’s help as with the durable power of attorney.

Make sure you have at least four copies of this document signed. Keep one for yourself, and give the other copies to your health care agent, your primary physician, and a trusted advisor.

Living Will

A living will expresses your preferences about certain parts of end of life care, instead of leaving it up to the person named in your health care proxy.

Having a lawyer who has witnessed life or death decisions with other clients help you can often better facilitate conversations about this difficult topic. It may be less stress emotionally on you and everyone involved to have a lawyer’s help setting up this document.

DIY estate planning is not for everyone, or at least not every aspect of it. Knowing what you are comfortable handling on your own and what you want guidance with will make the planning go much smoother (and cheaper in the long run) for you and your family.

If you want more estate planning tips, check out Dan Higson’s other blogs here. This one goes over how to fairly distribute the assets of an estate. If you have more questions about estate planning in the state of California, contact the Law Firm of Hathaway, Perrett, Webster, Powers, Chrisman & Gutierrez today!

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