Earlier this week, we wrote about why DIY estate planning can be such a problematic endeavor. Not only can using DIY tools without a lawyer’s advice and guidance be costly, but you might not realize you’ve made a mistake until it is too late. Now, we are going to again look at a few more of the common problems that people encounter when they use DIY estate planning devices. If you are thinking about making an estate plan on your own and have purchased, used, or are considering any kind of DIY tool, you should always talk to an attorney first.
DIY Mistake 4. Creating a revocable living trust and not funding it.
Contemporary estate plans almost always rely on revocable living trusts as one of their primary tools. These devices occupy an important space in estate planning because they provide such far-reaching benefits. Your trust, if properly created and funded, will not only allow your estate to avoid probate, but will give you flexibility when making inheritance choices, and even provide some incapacity planning protections.
Yet the act of simply creating the trust document, sometimes called a trust instrument, is not enough to obtain all the benefits a revocable living trust provides. You also have to take the all-important step of funding the trust. This involves transferring individually owned property into the trust’s name. Failing to fund the trust will effectively mean that the trust does not give you the benefits you had hoped for.
DIY Mistake 5. Creating a will or revocable living trust to avoid estate taxes.
Even though the estate tax issue has diminished significantly in recent years, it is still something many people will have to take into account as they create an estate plan. However, while there are tools that will allow you to reduce or eliminate the burden the estate tax has on your state, using a will or revocable living trust to accomplish this goal is not possible. Wills and living trusts do nothing to reduce the estate tax.
DIY Mistake 6. Forgetting About Your Plan
Whether you create an estate plan on your own, have an attorney help you, or a combination of the two, it’s absolutely essential to remember that you are not finished with the estate planning process once you have created all the documents you need. As time goes by and as your life changes, you will need to regularly review and update your plan. Laws change, people change, and your choices can change. When any of these things happen, you need to be ready to make the necessary updates so that your plan is as good as it can be.