There are some situations in which expert advice is truly necessary, says Jack T. Carney, an attorney at The Law Office of Jack Carney LLC in Birmingham, Ala. Get professional help in these situations:
Hire a pro if:
- Anyone in your family has a disability.
- You're in a blended family.
- You have assets and insurance in excess of the current estate tax exemption of $3.5 million.
- You own real estate outside of your state of residence.
Also ask yourself whether you truly know the intricacies of will-drafting and are willing to take the risk of committing an easy-to-make mistake that will wholly invalidate your will. "Most states don't recognize holographic -- or handwritten -- wills," says Kristi Mathisen, a CPA and estate planning attorney at the Seattle wealth management firm of Laird Norton Tyee. "Most states also require one or two witnesses and some evidence that the person making the will is competent and not under duress. You also can't do a videotaped will."
The most important thing to remember about DIY estate planning is that if you make a mistake that invalidates your will, the entire document will be thrown out. "Many people think an invalid will still influence(s) where your assets go, but it doesn't," says Mathisen. "If you have an invalid will because of a failure in the execution of the document, your state's law of intestate succession steps in."
Also be brutally honest with yourself about whether you truly understand what will happen to the proceeds of all the contractual estate planning agreements you've entered into over your lifetime. "Contract law covers things like U.S. savings bonds and bank accounts, which are almost always held in joint tenancy with a right of survivorship," Mathisen says. "There are also pay-on-death accounts in which you open an account, check a box as payable on death and name somebody to receive those funds. Retirement plans, individual retirement accounts and life insurance policies also have beneficiary forms."
With each of those contractual documents, do you want the proceeds paid directly to the beneficiary? If your beneficiaries are minor children, would you prefer they get the funds over time or at a specific age? You need to be able to answer those types of questions -- and then create valid legal documents to fulfill your wishes -- if you choose to do estate planning without expert advice.
"I'm about to hand a check for $400,000 to an 18-year-old because instead of making sure her life insurance proceeds went into a trust for her daughter, the mom left the money to her daughter outright," Altman says.
Will you know when changes are necessary?Finally, remember that an expert can help you identify when changes in the law make it necessary to update your estate planning documents. "Sometimes people think that when they've done estate planning, they never have to look at those documents again," says Altman. "I had clients who did estate planning with me in 1997. Since then, the estate tax laws changed, and an obscure regulation that affected a small fraction of the public -- including them -- changed."
Though Altman sent the clients many letters suggesting that they update their documents, they didn't respond. When the wife died earlier this year, the husband was hit with a large estate tax bill. "Due to the change in the estate tax laws and the fact that they didn't take advantage of this small modification in a regulation," says Altman, "it cost $200,000 more in estate taxes than it would have cost if they'd have just updated their estate planning documents. For not wanting to spend $1,000 to $3,000, it's cost them $200,000."
Altman has final words of caution. "There are a number of people who don't consult estate planning experts because they don't want to spend the money," he says. "But estate planning is something that if you make a mistake, there's no way to correct it because you're no longer around. If you don't pay to have estate planning documents done properly now, your heirs will probably pay more than you'll have ever paid a professional to do them. In many ways, the most selfless thing you'll ever do is to make sure your children or heirs will receive your assets in the best and least costly way possible."
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