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The last time you want to be cheap

May 17, 2011 | | Comments Comments Off

Do It Yourself Estate Planning–A Uniquely Bad Idea!

The headline of Rob Clarfeld’s Forbes.com column pretty much says it all.

If you don’t have much money, then a DIY solution such as LegalZoom or WillMaker may be all you can afford. And it’s probably better to have a DIY will than nothing at all, particularly if you have minor children (you need to name a guardian for them). Nolo legal guides such as “Plan Your Estate” can be a good primer to read before you start.

What baffles me, though, are people who insist on doing it themselves even after they’ve accumulated some assets. Estate planning is extraordinarily complicated and can go wrong in so very many ways. Unintentional consequences abound. As Clarfeld puts it:

Most will never know the woeful inadequacies of their self-drafted documents – this knowledge will ultimately reside with their families, often as they incur enormous legal fees on unsuccessful attempts to exact post-mortem modifications.

I used to think the DIY approach was fine—until I took a CFP course on estate planning and realized how immensely complicated this ever-changing area of the law can be. As older relatives have become incapacitated and died, I’ve seen firsthand how badly things can go awry when you don’t get good advice.

What you want is an estate planning attorney who has seen many, many estate plans go into effect. He or she will know the advantages and pitfalls of the various approaches to dividing up your assets, and can let you know what you’re facing so you can make wise decisions while it’s still possible.

There isn’t a bright line where you pass suddenly from “okay to DIY” to “gotta get an attorney.” Here are some cases where professional help is pretty much a slam dunk:

  • If you have minor children and any money (retirement funds, life insurance, whatever), then hiring a professional is a good idea, since leaving money to minors can be tricky.
  • If you have contentious relatives who may not carry out your wishes or will fight over your estate, and you care about the outcome.
  • Your estate may face estate taxes. The amount exempted from estate taxes currently is a whopping $5 million per person, so very few estates have this problem—at the moment.

I’d also vote for professional help if you’re much over 50. Although strokes or disabling illness can happen at any point, they grow more likely as we get older, and you want to have good, sound planning documents in place so that someone can take over your financial affairs and medical decisions.

I can tell you where NOT to go for advice: “free” seminars. These are usually pitches for insurance products or other potentially unsuitable investments. Good, personalized advice costs money, although if you don’t have a multi-million dollar estate, the costs shouldn’t be prohibitive.

A simple will with accompanying documents, such as powers of attorney for health care and finances, typically costs $200 to $500. If you live in a state with high probate costs, such as California, you may want to spring for a living trust, which will run $2,000 and up.

Either way, it’s not too much to invest in your family’s future well-being.

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