By Rachel Rosenfeld and Ritzi K. Lam
On March 19, 2020, California Governor Gavin Newsom issued a statewide shelter in place order effectively causing non-essential businesses to shut down, schools to halt classes, and families to stay home. Our state’s (and eventually our country’s) response to the COVID-19 pandemic is unprecedented and at times, as frightening as the virus itself. With the trending of hashtags such as “#stayhome” and “#hometogether” and, our favorite, “#stayhealthy,” came another trend: creating an estate plan.
Americans began to acknowledge the eventuality of their own mortality with a seriousness and urgency that we have never seen before. As a result, people saw the necessity of having a plan that reflects their wants and wishes in the event of their incapacity and ultimately, their death. News articles such as this one from the New York Times, or this short but sweet article from CNBC, started popping up all over the internet and friends’ social media newsfeeds. Truthfully, as estate planners, our first reaction was “FINALLY!”. We have been attempting to get younger individuals and families to see the importance of an estate plan for years. After our initial excitement, we then saw this sudden surge in interest in preparedness as a potential area of liability for the average individual or family. This is because of the “Do-It-Yourself” Estate Plan (the “DIY Plan”).
When we refer to the DIY Plan, we are talking about wills, trusts, health care powers of attorney or financial powers of attorney that individuals create without the guidance of an estate planning attorney. There are plenty of online self-help estate planning websites, and even smartphone applications. There‘s also the good old-fashioned “print and fill in the blanks” statutory will. There are several common issues and missteps that individuals and couples can take when creating a DIY Plan.
Problem #1: Failure to Execute (Properly)
The most common issue we come across when reviewing or litigating DIY Estate Plans is the failure to properly execute the estate plan documents. Some don’t execute at all! A typical scenario is like this: A couple is certain they have a simple estate. They are smart, sophisticated, and technologically savvy. They decide to use an online service to set up their wills and a revocable living trust. The couple answers all the online service’s prompts and even chats with one of the service’s representatives on specific questions. While their documents are pretty basic, the drafts look good online and nothing appears to be missing.
The next step is to just print out the documents and sign them. This seems easy enough, right? Unfortunately, no. It is best practice to have a revocable living trust be notarized and the type-written wills must be signed in the presence of two witnesses who are not beneficiaries of the estate to be valid. (California Probate Code section 6110(c)). Likewise, powers of attorney and advanced health care directives must be notarized or signed in the presence of two witnesses to be valid. (California Probate Code sections 4121 and 4674). More often than not, these estate planning documents are either signed without meeting the requirements or are never signed because they are put aside to be signed at a later date when the couple has time to gather two witnesses or go to a notary. Without proper execution of estate planning documents, the documents are unenforceable and meaningless.
Having a dedicated estate planning attorney work with you means having a professional guide you through the execution process. A good estate planning attorney will set up a meeting to guide their clients through the signing process and ensure the estate plan is properly executed and meets all legal requirements. Clients should leave a signing appointment with the confidence their plan is valid.
Problem #2: Failure to Fund and Re-title Assets
The second most common pitfall in using a DIY Plan is the failure to fund the newly created trust and retitle assets. Let’s say the couple in the first scenario was able to get their plan executed properly: they rounded up two neighbors to be witnesses and visited a local notary. Mission accomplished: Probate Court can now be avoided, right? Wrong. While creating enforceable documents is an essential step to setting up an estate plan, it is not the final step. It is now time to fund the trust with the trustor’s (the person who created the trust) assets.
DIY Plan services occasionally may advise you to fund your trust, but they will not assist you with that funding or guide you through the funding process. It is just not practical given the impersonal level of services they offer and the cost at which they offer those services.
Funding your trust through the retitling of assets or transfer of assets to your trust is essential to avoid costly and time-consuming Probate Court processes and to get the trust that was so carefully created to work the way it should. Assets, such as a house or bank account, that are not titled in the name of the trust, are not under the control of the trustee and do not pass to a trust’s beneficiaries.
It is important to not just have your estate plan drafted by a professional, but to choose an attorney that is reliable, responsible, and will be present for you and your family as you all grow older.
Problem #3: Plans are Not One Size Fits All
The third and final notable problem with DIY Plans lies in their simplicity. To most people, having a simple trust sounds like the best type of trust to have. However, not so surprisingly, all individuals and families are unique, and it is that uniqueness that allows an attorney to create a plan that matches each client’s needs and wishes.
To explain why the simplicity of a DIY Plan is not the type of simplicity one wants in an estate plan, it makes the most sense to compare the information provided to DIY Plan services to those of an estate planning attorney during the initial meeting. DIY Plan services range from asking absolutely no questions (e.g., the fillable statutory will and power of attorney available at the UPS store) to giving clients the ability to answer moderately detailed questions that will affect the documents they receive. Usually, the basic questions will be asked: Who is your immediate family? Who do you want to be in charge of your estate when you die? Who do you want to leave your estate to? Who do you want to care for your minor children?
During an initial estate planning meeting, an attorney gets to know their clients and to build client trust throughout the confidential relationship. It is important to have an honest and candid conversation about tough subjects such as inter-family relationships, wealth, and wishes when a client becomes seriously ill or incapacitated. A good estate planner will want to know family details such as which child is better at managing money, whether a son or daughter-in-law is untrustworthy, or whether there is a grandchild who may have special needs. An overall picture of a client’s assets and how they are distributed over real property, retirement accounts, or cash are also critical in an attorney’s assessment of what type of estate plan is best for that particular client.
There are countless nuances and scenarios that make each client unique. Unless individuals are interacting on a personal level with a licensed attorney who is trained to spot issues and problem solve in the area of trusts and estates, they will not truly get a plan that fits their wants and needs.
It’s clear that the “one size fits all” approach marketed by online estate plan services will not work for everyone. If you are looking into creating an estate plan, please consult with a licensed attorney who specializes in estate planning to ensure that you have the peace of mind that you have an estate plan that is tailored specifically for you.