In an effort to save costs, many individuals are tempted to rely on a do-it-yourself will as their entire estate plan. However, not only do DIY wills often result in complications, but you are also leaving out other essential documents that are needed in an estate plan. For example, wills do not address incapacity, non-probate property and estate taxes. A complete estate plan includes documents like living wills, durable powers of attorney and trusts. Only relying on a DIY will is a mistake. Instead, you should work with estate planning professionals to create a comprehensive estate plan that fits your unique goals and needs.
Most people realize they need an estate plan, but there are many reasons they hesitate to accomplish this critical task. For some, it can be an unpleasant topic that they prefer to avoid, but others avoid it because of the cost. If this describes you, you may be inclined to keep things simple and take a do-it-yourself approach. However, by relying only on a DIY will, you could be leaving your family unprotected.
There are two primary reasons that you need more than a DIY will in your estate plan:
- A DIY will can lead to expensive and unpleasant estate planning mistakes.
- An estate plan includes much more than just a will.
You are much better off working with experienced estate planning professionals who take into consideration your needs, concerns and goals.
Three major issues that arise with DIY wills are outlined below.
- A DIY will may be invalid.
- A DIY will may be unclear.
- A DIY may not be complete.
Every state has its own requirements for what makes a will valid. There are different rules for things like signatures, witnesses and notarization. The laws are not flexible. The slightest mistake can invalidate the entire document.
DIY wills have a much greater chance of containing vague or confusing language because a trained attorney is not drafting the document. You must be sure to clearly communicate your beneficiaries and describe all of your property. If the court cannot confirm what you meant, it will not apply your wishes. If two beneficiaries believe that they are entitled to the same property, it could result in a court battle. Your inheritance could end up going to an unintended beneficiary.
Everyone's estate planning needs are different. When drafting a will, it is critical to consider your unique goals and concerns. There are many situations where a DIY will may be too simple, such as if you are not married to your partner, own a business, have complex assets or want to put conditions on your inheritance. Only a professional can ensure that your will is a complete representation of your wishes and fits your needs.
Working with an estate planning professional will give you peace of mind that you have a comprehensive and enforceable will. Your attorney will also guide you through the other documents that your estate plan should include. Many people mistakenly believe that a will is the only estate planning document that you need, but it is only one part of your estate plan.
Why do you need more than a will in your estate plan?
A will is the foundation of many estate plans. It addresses the disposition of your assets after your death, names an executor and designates a guardian for minor children. However, there are many other areas that a will does not cover. Various other documents are needed to create a comprehensive estate plan. A complete estate plan includes much more than a simplistic DIY approach. Below are seven reasons why you need more than a will in your estate plan.
A will does not address incapacity
A will only goes into effect after you die. If you become incapacitated through illness or injury, your will is of no use. You will need documents, such as a living will and durable powers of attorney, to prepare yourself and your family for the possibility of temporary or permanent incapacity. The three primary documents you should consider including in your estate plan to address incapacity are a:
- Living will
- Health care power of attorney
- Financial power of attorney
A living will (also referred to as an advance directive) governs your end-of-life care if you are not mentally or physically able to speak for yourself. It includes the type of life-sustaining measures you want to receive or have withheld (e.g., ventilator, feeding tube, etc.). As well as ensuring that your wishes are carried out, a living will helps ease your family's stress and anxiety during a very difficult period.
In a health care power of attorney, you designate an agent to make health care decisions on your behalf and communicate with your medical providers if you become incapacitated. Sometimes a health care power of attorney is combined together with a living will.
In a financial power of attorney, you designate an individual to make financial decisions on your behalf, such as paying bills and handling your taxes. You can select which specific powers you want to grant your agent. The agent is legally required to act in your best interests.
Without these documents, your family members may have to petition the court to gain the authority to act on your behalf. This process can take time and be expensive. Furthermore, when family members do not have living wills or powers of attorney to guide their actions, they can disagree on the correct course of action. These disagreements can cause painful disputes, occasionally even leading to legal battles.
A will does not control all of your property
Many people assume that all your property will be governed by your will. However, some types of property cannot be conveyed to others through your will and will pass automatically based on beneficiary designations. Examples of these assets include:
- Property owned as joint tenants
- Life insurance
- Pension plans
- Retirement accounts
- Bank accounts
The named beneficiary will inherit these assets upon your death outside of the probate process. Your will cannot change or override beneficiary designations that are listed on payable-on-death and transfer-on-death forms. It is essential to understand who will inherit your non-probate property after you die. An estate planning attorney can help you recognize which property will pass outside of probate. They can assist you in contacting the banks or companies to ensure that your beneficiary designations are updated.
A will does not help you avoid probate
Your will must go through a court process called probate before it is considered valid and the assets are distributed. Trusts and non-probate property, on the other hand, pass directly to the beneficiaries and avoid probate. There are several reasons why an individual may want to use estate planning to avoid probate.
Probate files, including the will, are public court files. This means that anyone can request these documents from the court. Wills often contain personal financial and family information, which some individuals would prefer to keep private.
The probate process will cost your family money. Your estate must pay court costs and attorney fees associated with the probate process. Even a modest estate can end up costing thousands of dollars in legal fees.
Assets that pass through your will are not available to the beneficiaries until the probate process is complete, which can take months or even years. This issue can be especially difficult for family members who need the inheritance to care for themselves and pay bills.
The probate process gives interested parties a chance to challenge your will if they believe they should have been included. A dissatisfied family member can cause a costly and lengthy court battle that ends up tearing your family apart. A DIY will has an even greater chance of being contested than a will drafted with an estate planning attorney.
A will does not consider how taxes will affect your estate
Depending on the worth of your estate and where you live, your assets could be subject to estate and inheritance taxes after your death. A will does nothing to help minimize or avoid taxes on your estate.
In 2022, only estates valued over $12.6 million for individuals and $24.12 million for married couples are subject to the federal estate tax of up to 40%, depending on the value of the estate. In addition to federal estate tax, some states have their own estate or inheritance taxes, which kick in at lower threshold amounts than the federal estate tax. For example, Massachusetts has a tax of .08% to 16% on estates over $1 million. Other states that have inheritance taxes include Pennsylvania, New Jersey, Maryland, Kentucky, Iowa and Nebraska.
An estate planning attorney can help you minimize estate taxes through tools like trusts, life insurance policies and lifetime giving.
A will does not offer special protections to disabled beneficiaries
If your child or other beneficiary is disabled, leaving them property in your will can have unintended negative consequences. First, leaving the child an inheritance outright will often threaten their ability to qualify for needs-based government benefits, such as SSI or Medicaid. The gift can push them over the asset limit, causing them to lose access to essential treatment and care. Furthermore, many disabled individuals, no matter their age, are unable to manage their own finances.
Estate planning tools, like a special needs trust, are critical when providing for disabled individuals. A special needs trust is a legal arrangement that allows the disabled beneficiary to receive income without disqualifying them from government benefits. A trustee is named to manage the assets for the benefit of your loved one.
A will does not protect your estate from creditors
A will does not protect your estate from your creditors or the creditors of your heirs. Your creditors can make claims during the probate process, and after the property is distributed to your loved ones, their creditors will be able to reach the assets. Only a comprehensive estate plan will help shield your assets from creditors. One common tool is an irrevocable trust. Certain creditors, such as the IRS, may still be able to reach the trust property.
If you or your beneficiaries have significant debt or are at risk of lawsuits or divorce, you should reach out to an experienced estate planning attorney to discuss your options.
A will is not the appropriate document for funeral instructions
Although you can technically leave funeral instructions in your will, it is not recommended. Wills are usually not read until days or weeks after your death. This is often too late for families that have to make funeral arrangements immediately. Instead, you should create a separate funeral instructions document outlining your funeral wishes. You can include information, such as:
- Whether you want a funeral or memorial service
- Whether you want to be cremated or buried
- Where the service should be held