Do-It-Yourself Estate Planning

Do-It-Yourself Estate Planning

The author reviews several books, software products, and website that help you create wills, living trusts, powers of attorney, and more

By Alan G. Orlowsky, J.D., C.P.A.

You would never perform brain surgery on a family member unless you were a brain surgeon, right?

Maybe you would prepare your own income tax returns if you have a head for numbers and tax codes, even if you´re not an accountant.

You would definitely change a burned-out light bulb-you certainly don´t have to hire an electrician.

Where does estate planning fit on that do-it-yourself continuum: never, maybe, or definitely? Could you prepare your own will, living trust and powers of attorney (the “basic” estate plan) without hiring a lawyer? If so, would your DIY documents hold up in court? Would they achieve your goals of (a) passing your assets and personal property along to your chosen heirs in an orderly fashion and (b) minimizing your estate tax and gift tax burden?

I´ll cut through the suspense and tell you the answer: it´s a cautious maybe. You can find some pretty good resources to help you prepare your own estate plan, including books, software and websites.

How they work

To test each of the products I selected in the chart for accuracy and thoroughness would take me literally months. In this article, therefore, I am describing DIY estate planning tools collectively in three categories-books, software and websites-rather than try to rate or rank each product individually.

In the book category, I recommend the Wills, Estate Planning & Trusts Legal Kit because it provides several chapters on the basics of estate planning, followed by fairly clear instructions for filling out the forms, and then 240 pages of sample forms. For example, it has 20 different kinds of sample wills, depending on family and financial status; 12 different living trust forms; etc. The book on powers of attorney complements the first book nicely.

To use the DIY software, you place the CD in your CD drive and follow the step-by-step instructions. Typically, the program asks you a bunch of personal questions and creates a personal and family profile. Then you fill out a long questionnaire, and the program generates completed documents that you can print out. If you have any questions along the way, the program refers you to background information residing on the CD, or points to a website where you can find the answers.

The DIY websites are similar to DIY software, except you do everything online. You don´t pay any fee until you´ve completed the questionnaire and are ready to receive the completed documents, either by e-mail or by regular mail.

How much money can you save?

Among the DIY tools that I selected in the chart, the least expensive option lets you prepare a simple will for $20. The most expensive option charges you up to $800 to prepare a will, living trust and two powers of attorney (for property and health care), and have the documents reviewed-after they are prepared-by a live (but unseen and anonymous) attorney.

In comparison, a trip to a reputable lawyer´s office to have a will, living trust and two powers of attorney prepared will cost you roughly $800 to $3,000 or more, depending the complexity of your estate and family relationships. So a DIY estate plan can save you dozens to thousands of dollars, assuming the documents are prepared correctly and appropriately for each individual.

That, however, is a big assumption. If your executor and heirs discover after your death that your will or trust was prepared incorrectly, the cost of the mistake could amount to many times more than $3,000. Do things like that really happen? Unfortunately, yes, all the time.

In fact, in my 30-odd years of practicing law in the field of estate planning, I´ve never seen a DIY estate plan that was correctly prepared-and I´ve seen more than a dozen of them. One client realized, too late, that the revocable trust he had written for himself was really irrevocable. In another case, my client discovered that her deceased mother had written a number codicils to her wills and trusts, which were totally invalid.

Just two weeks ago, I found a few significant errors in a basic estate plan created by the LegalZoom website (the most expensive of the DIY tools). For example, the user – let´s call him Bob – intended to name his wife as the primary beneficiary of his living trust, and his 10-year-old daughter as the contingent beneficiary. Somehow, his wife was omitted. As a result, if Bob dies tomorrow, all his assets would be passed along to his daughter, leaving nothing for his wife. A court would have to set up a minor´s estate and appoint a guardian ad litem to manage it. Moreover, the trust was improperly funded. The unseen LegalZoom lawyer who reviewed the trust had no way of knowing this was not the result that Bob had intended. But Bob assumed the documents were fine, so he paid Legal Zoom $550 and signed the documents. Now it´ll cost him more than $550 to fix the mistakes.

Whose mistake was it?

I am not necessarily saying that most or even some DIY tools contain glaring errors of fact or give negligently bad advice. In many cases, the error is a result of the user following the instructions carelessly or failing to understand the instructions. In most cases, the DIY tools are programmed to handle only simple estates, and can´t deal with complexities such as blended families, children with special needs, assets with substantial capital gains, deferred taxable income, or estates valued at more than $1.5 million in 2004. Still other programs fail to take advantage of sophisticated estate planning strategies because the tools are not comprehensive enough to account for the innumerable variables and myriad circumstances that an individual can be in.

Biased or objective?

I want to acknowledge that I have a bias, of course. More people doing their own estate planning means less work for attorneys like me. On the other hand, I´ve earned some large fees (far, far above $3,000) straightening out DIY estate plans that were so poorly written that they were practically worthless. In any case, I have tried to evaluate the selected DIY tools as objectively as possible.

I am not trying to discourage you from using DIY tools. But I strongly recommend, whichever type of DIY tool you choose, that you first do background research in the library to become familiar with the terms and concepts used in estate planning.

Finally, you should ask an attorney to review your documents before you sign them – in every case, without exception.

SELECTED DO-IT-YOURSELF ESTATE PLANNING TOOLS (2003 data)

Product Price (2003) Will Living trust Power of attorney for property Power of attorney for health care Credit shelter trust Living will, healthcare directive Other documents
(see below)
Software Family Lawyer (Broderbund, www.broderbund.com)
$30
?
?
?
?
?
1 2 3 4 5 6 7 8
WillMaker (Quicken/Nolo, www.nolo.com/lawstore/)
$50*
?
?
?
?
2 3 5 6 7 8
WILLPower (Kiplinger, www.kiplingerswillpower.com)
$30
?
?
?
?
?
1 2 4 5 6 7 8
Books Wills, Estate Planning & Trusts Legal Kit (Sphinx Publishing, Chicago)
$27
?
?
?
1 2 3 4
Power of Attorney
Handbook
(Sphinx)
www.sphinxlegal.com
$20
?
?
?
5
Websites LegalZoom (www.legalzoom.com)
**
$59 to $109
$349 – $520
$35 to $75
$35 to $75
Legacy Writer (www.legacywriter.com)
***
$20
$15
BuildaWill (www.buildawill.com)
***
$20


WillMaker is the only software product that includes printed handbook & user manual (Optional: $40 download, no manual)

** Prices include live attorney review

*** No attorney review Other documents:

  • Codicils
  • Amendment to trust and/or change of beneficiary
  • Trust certification and/or revocation
  • Asset transfer letters (to trust)
  • Power of attorney revocation
  • Memorial plans
  • Child and elder care agreement
  • Worksheet for executors

© 2003 Alan G. Orlowsky, Attorney at Law, CPA

About the Author

Alan G. Orlowsky, President of Orlowsky & Wilson, Ltd. in Lincolnshire, Illinois, has been counseling people on estate planning for 28 years. He previously worked for the IRS in its Estate and Gift Tax Division. He also worked for the Deloitte & Touche accounting firm, and he has taught taxation and accounting at Loyola University of Chicago, School of Business.

Al is a contributing author of the book 21st Century Wealth (Esperti Peterson Institute, Denver, 2000), and has written numerous articles on the subject of estate planning. Contact Alan Orlowsky by email or call 847-325-5559.

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