(Source: WallStreetJournal): Cheryl Winokur Munk – Two years ago, Matt Ahrens and his wife were heading out of state without their infant son, and neither had a will. Mr. Ahrens heard a radio ad for an online document company and downloaded a online will from the site.
“For me, the scariest thing was the idea of something happening on vacation and our child having to be a ward of the state until he was placed with somebody,” says Mr. Ahrens, a financial adviser with Integrity Advisory LLC, a registered investment adviser in Overland Park, Kan. “Just to eliminate that fear, the $100 was worth it.”
Using online sites like LegalZoom and LegalNature to craft estate-planning documents such as wills, trusts and powers of attorney is appealing for those who can’t (or don’t want to) shell out several hundred dollars for an estate-planning attorney—or who need the paperwork settled fast. But there can be significant risks as well, especially if someone’s financial situation is complex or involves issues that potentially need legal oversight.
Here are some things consumers should consider before they set out on the do-it-yourself road:
DIY estate planning may work well for people with uncomplicated estates who don’t require trust or tax planning. It’s also an economical way to make minor tweaks to an existing estate plan.
It depends on “what you are trying to accomplish and your relative knowledge level,” says Bradford D. Creger, president and chief executive of Total Financial Resource Group, a wealth manager in Glendale, Calif. He took a DIY approach to amend the guardian for his minor children and name a different successor for a living trust. “Some minor changes are perfectly fine for DIY,” he says.
Aaron Darke, founder of Darke Marketing LLC, a marketing communications firm in Lake Tahoe, Nev., had attorney-drafted wills to reference, so had no worries about using the site LegalNature to craft updated documents for himself and his wife. The estate was straightforward, and as a businessman, the legal terminology didn’t faze him. He decided he could always ask an attorney to review his work if concerns arose.
However, people with significant and more-complicated assets, complex family situations or other out-of-the-ordinary circumstances likely need more-sophisticated advice than online sites provide.
Keisha Blair, co-founder of Aspire-Canada, a career and money platform for young professionals, was 31 when her husband died from a rare illness. Ms. Blair had two young sons and no will spelling out how her assets would be divided in the event of her death. She quickly discovered that her needs were too complex for a DIY option. As a young widow, one consideration was getting professional advice to ensure her children would be protected if she remarried; she also didn’t know if her sons were carriers of the disease that killed her husband, which would mean big changes to her estate plan.
Trust work is also best left to an estate-planning attorney, says Hagen Pruemm, president of financial advisory firm SIS Financial Group in Hoffman Estates, Ill. Mr. Pruemm, who doesn’t help clients create wills, has worked with several clients who created a trust online and didn’t realize they also had to retitle assets to fund the trust. “Otherwise the trust doesn’t do you any good,” he says.
Are you comfortable knowing you could be missing something?
Elijah Kovar, a financial adviser and founding partner of Great Waters Financial, a retirement planner in Minneapolis, has seen many do-it-yourselfers overlook seemingly small things—like not naming a contingent executor or beneficiary—that can become problems if not addressed. “You’re paying the lawyer for the expertise of knowing you’re not missing anything,” he says. “We don’t know what we don’t know.”
‘There are things an experienced estate-planning attorney can guide you through that a computer can’t.’
Certainly, it can be hard to get comprehensive advice online. For instance, there are tax considerations and tactics to avoid probate that are best left to experts, says John Deglow, a certified financial planner and investment adviser at Unified Trust Co. in Lexington, Ky.
“There are things an experienced estate-planning attorney can guide you through that a computer can’t,” he says. (Neither Mr. Kovar nor Mr. Deglow help clients create wills.)
Are you inviting legal trouble?
In general, a lay person is more likely than an experienced lawyer to make a mistake in drafting a will, trust or power of attorney, according to F. Skip Sugarman, a partner at Bloom Sugarman LLP in Atlanta who litigates issues involving estates. “That makes a do-it-yourself product more susceptible to a challenge,” says Mr. Sugarman, who doesn’t help clients create wills.
Jef Henninger, a litigator in Tinton Falls, N.J., recalls a family dispute he handled involving two brothers and two DIY wills. One will distributed the mother’s assets fairly equally between the brothers, while the other, with a later date, favored the brother who was caring for the mother. The brother who stood to lose significant assets alleged the caretaker had pressured the mother into signing a new will. The case was eventually settled.
Although a dispute might still have occurred had the mother used an attorney from the beginning, there would have been an impartial third party to testify about her expressed desires in distributing the assets. “Since it was just a he-said, he-said case, the end result would have likely been better if an attorney was handling everything from the start,” says Mr. Henninger, who doesn’t help clients create wills.
To be sure, there are ways to do both: use an online site and get the benefit of a lawyer. Chas Rampenthal, general counsel of LegalZoom, says users of his company’s estate-plan bundle receive one year of access to independent attorney advice.
“This attorney can help you navigate more-complex issues and even refer you out to an attorney in the rare case that your needs are so complex that they can’t be addressed with our solution,” he says. “So as a consumer, you are covered.”
LegalNature says most cases can be handled online. But it recommends learning as much as possible about the topic and using a professional if users don’t understand or are uncomfortable with some issue.
As for Mr. Ahrens, he has no regrets about his DIY approach, but cautions people to consider their unique estate-planning needs. “A do-it-yourself will is definitely not for everyone,” he says. “But depending on your situation, it could be the most appropriate option.”