Top 5 Mistakes of Do-it-Yourself Estate Planning
I am often asked why someone should hire an attorney to assist them with their estate plan. My answer is pretty simple: one small mistake can cost your family money and headaches. Here are the top five mistakes I see when someone goes it alone when it comes to disability and estate planning: 1) Adding your children to your bank account In an attempt to avoid probate on any bank accounts and to give a relative access to bank accounts upon your disability, you are also inadvertently opening yourself up to the liabilities of your other joint owner (think bankruptcy, lawsuits, divorce) and questions regarding distribution of those jointly held assets upon your death. 2) Waiting too long to sign a power of attorney The purpose of a power of attorney is to appoint an agent to make decisions and manage your assets upon your disability. A power of attorney can only be signed if the individual is of sound mind. If a loved one waits to execute a power of attorney until after a diagnosis of dementia, it may be too late to execute a valid power of attorney. 3) I found it on the internet There are many websites out there that sell estate planning documents. It is obviously cheaper than hiring a lawyer, but that’s because you don’t have the benefit of actually talking to a lawyer. Estate planning is not a one-size-fits-all endeavor. The documents you find online may not work the way you intend them to work. 4) Failing to update beneficiary designations Many types of accounts pass to your loved ones via beneficiary designation. Often times the beneficiary designation is initially completed upon opening the account and then subsequently forgotten. But the reality is that family dynamics change, relationships change and finances change over time. What was a wise beneficiary choice when you were 23 may likely not be the right choice when you are 43 or 63. A qualified estate planning attorney will look out for these issues and advise you on how your beneficiary designations can work in conjunction with your larger estate plan. 5) Deed in drawer In years past a common estate planning technique involved drafted a deed creating joint ownership, often with a child, and keeping the unfiled deed “in the drawer.” The idea was that when the property owner passed away, the deed is filed and the home passes to the living joint owner without going through probate. There are many pitfalls to this approach. Talk to an estate planning attorney to learn about some great options available to pass real estate to your family without the hassle of probate.