Let’s say you plan to start a family, and you need to invest in a new car for a reliable mode of transportation. Suddenly, you decide to become ultra-resourceful and attempt to build your own car. You assemble the parts and get to work. Then the day comes when you complete your car and start the engine. You feel accomplished, but for the months you spent with your head down, you never considered the risks. Does your car have the safety and comfort features that an automotive company provides? How would you know if there’s a recall on a part? Did you allocate money in lieu of a warranty?
Too much can go wrong.
The same can be said about taking a DIY approach to your estate planning. The goal of estate planning is to coordinate a collection of documents from wills to trusts to ensure financial protection for your family or other beneficiaries. Having a sound estate plan means leveraging the expertise of professionals like financial advisers and estate planning attorneys.
Here’s why DIY estate planning is a recipe for disaster.
Overlooking the Smallest Detail Can Create Big Problems
Financial advisers and estate planning attorneys review your estate plan with a fine-tooth comb. There are too many details that can be overlooked by do-it-yourselfers. So-called small things like not naming a contingent executor or beneficiary can be problematic down the road. Professionals ensure you don’t miss anything and provide expert guidance like addressing tax considerations to avoid probate.
You Have a Complex Situation
There’s no such thing as an off-the-shelf estate planning solution. People may have unique needs that make their situations complex. As The Wall Street Journal notes, “These cases can include people with multi-million-dollar estates, disabled children who require special needs trusts, blended families (especially where there may be animosity between the kids and the new spouse), property in foreign countries and complex family businesses.” This is a lot to tackle on your own.
Instability with Your Will
On its face, a will seems rather simple, as we’ve previously noted: it is a legal directive that details your wishes as it relates to the distribution of your property and the care of any minor children that is active upon your death. But wills can evolve, especially if your estate increases in size, which means the value of assets goes up along with the number of people and contingencies. A lot can change, and with so much at stake, amending your own will creates too much risk. It’s best to work with a professional.
Your Trust Can Suffer
As we’ve pointed out, there are differences between wills and trusts. A trust is a legal document that bequeaths assets to a beneficiary, it’s operative as soon as it’s created, and it can be used to begin distributing property before death, at death, or afterward. Trusts have many facets.
For example, trusts can be revocable, meaning provisions can be altered, or irrevocable in which the terms cannot be changed without the permission of the grantor's named beneficiary or beneficiaries. Irrevocable trusts for estates that are large enough (often over $5 million) have certain tax advantages. With so many moving pieces to trusts, addressing them on your own can be too overwhelming and potentially costly.
With an abundance of resources, including different software programs, it’s understandable that you’d want to do your own estate planning. There are simply too many pitfalls that can occur with DIY estate planning. Returning to the car metaphor, forgetting to update your will and trust is like neglecting to install airbags in your automobile. You can’t take any chances with your safety and financial legacy, which is why it is critical to engage the professionals.