It shouldn’t come as a surprise to you that estate planning lawyers have a rather negative view of do-it-yourself estate planning. Yes, it’s true that estate planning attorneys make a living by helping clients create plans, but it’s also true that we quite often have to deal with the mess that happens after someone uses do-it-yourself estate planning incorrectly. In fact, there are so many common mistakes that people who use do-it-yourself plans can encounter, that we are going to cover several of these mistakes in a two-part blog series over the coming weeks.
Do-It-Yourself Estate Planning Mistake 1. Creating a Will to Avoid Probate
Many people begin estate planning because they don’t like the idea of probate. The probate process applies to the property left behind by a deceased person. This process can be lengthy, costly, and not at all enjoyable.
However, creating a last will and testament is one of the worst things you can do if your goal is to avoid probate. Don’t get us wrong. Every capable adult should take the time to create a last will and testament as soon as they are able. However, creating a will does absolutely nothing to avoid probate. In fact, it does the exact opposite.
Every will a person creates in the state of New York has to meet some specific legal requirements. In order to determine if those requirements have been met, a probate court will have to get involved and review the will you have created. In other words, writing a will doesn’t avoid probate, it guarantees it.
Do-It-Yourself Estate Planning Mistake 2. Avoiding Estate Taxes by Using Revocable Living Trust
Revocable living trusts are excellent estate planning tools. These types of trusts excel at allowing your estate to avoid, or minimize, the effects of probate. However, unless your living trust contains soem very particular provisions, it will do nothing to help you avoid estate tax liability.
In recent years, the estate tax issue has diminished greatly because so few estates are now subject to this tax. However, people who are worried about estate taxes have often heard that by creating a trust they can avoid their estate having to pay. While it is true some living trusts will help reduce or eliminate estate taxes, many living trusts do not.
Do-It-Yourself Estate Planning Mistake 3. Relying on One Tool for Everything
Another common mistake that people who create their own plans often make is that they rely too much on one tool for everything. Your plan needs to address all the important issues facing you, and a single tool will never be able to do this. Moreover, the tools you create should be made in a way so that they complement one another, providing you multiple layers of protection.
- Changing “Irrevocable” Trusts Through Decanting - September 22, 2021
- Donor Advised Funds: Too Good to Be True? - September 15, 2021
- Changing “Irrevocable” Trusts Through Judicial and Nonjudicial Modification - September 8, 2021