Should You Hire an Attorney or Do It Yourself?

 In Practical Matters, Revocable Trusts, Wills

Should you create your own estate plan with a do-it-yourself on-line program (with the help of this website) or by hiring an attorney (also guided by this website)? The on-line programs are less expensive and in many ways more efficient — you can create the plan in your pajamas and at any time of the night and day without having to make one or more trips to a lawyer’s office. On the other hand, you may not find answers to your questions, may get waylaid and not get the job done, and won’t know if you are overlooking or misunderstanding a crucial issue.

In general, if your situation is relatively straightforward — one spouse, or unmarried, with children from one relationship, or no children, and uncomplicated assets — an on-line program will probably be adequate. If, on the other hand, you have property in more than one state, are in a second or third marriage or relationship, are not a US citizen or are married to a non-citizen, have children from more than one relationship or are concerned about tax, special needs or long-term care issues, I’d strongly recommend working with an attorney experienced with the issues you are concerned about.

In considering whether to go with an attorney or strike out on your own, you can consider the pros and cons of both approaches. They include the following:

Advantages of DIY Plans

  • They’re cheap.
  • You can work on them when convenient or inspired, even at 3:00 in the morning.
  • They’re private – you don’t have other people knowing your business.

Advantages of Working with an Attorney

The attorney will

  • answer your questions.
  • advise you about traps for the unwary that apply to you.
  • know about specific state laws that may affect your situation.
  • use his experience to help you make any difficult decisions.
  • prod you along to complete the process.
  • modify her standard forms to suit your situation and goals.
  • help resolve and plan for complex situations, whether having to do with taxes, businesses, long-term care planning or family situations.
  • help with follow-up issues, like properly titling accounts.
  • be connected to other qualified professionals, such as accountants, financial planners, and geriatric care managers.

Disadvantages of DIY Plans

Essentially, the disadvantage of DIY plans is that they don’t have the advantages of working with an attorney. Recognizing this, some on-line services, including the largest, LegalZoom, now offer consultations with lawyers through its Legal Plan. This may work if you simply need answers to a few questions, but not if you require more complex planning. As far as I can tell, they don’t revise and tailor the LegalZoom forms to suit the clients’ goals and situations.

One also wonders (or at least I do) about the quality and experience of the attorneys in the LegalZoom system. While it’s not totally clear from the website, it appears that clients can have an annual one-hour legal checkup and as many 30-minute consultations as needed for as little as $10 a month. Even if all of the $120 a year goes to the attorneys, it’s not clear how they’re going to make a living at these rates. The economics may work out if most customers don’t end up using the service, permitting LegalZoom to pay the participating attorneys a reasonable rate when the consumers do in fact call the lawyers in the plan. In addition, if the attorneys involved work out of their homes, they can keep their overhead low. It’s also possible that the attorneys view these consultations as “loss-leaders” as part of their marketing plans. They’ll make very little money on the consultations, but develop relationships with clients who will come back to them or refer others to them for more substantial matters.

 

An example of the risks of doing it yourself:

 

My firm was recently engaged to probate the estate of a man who died earlier in the year. I would have liked to have known him. He had been a professor of English at a local college and seemed from his obituary and his estate plan to have been an interesting thinker. His estate plan consisted of a trust he had drafted himself and a letter of instructions. Unfortunately, for reasons I will explain below, it did not include a will. The well-drafted trust and letter of instructions, written with verve, were consistent. They directed that his home pass to his partner of many years, that his vacation home in another state go to his daughter, who lived there, and that the rest of his property go to his other three children in equal shares after paying off the mortgage of about $50,000 on his home.

Here are the glitches. First, when the professor drew up the plan, his savings and investments totaled approximately $950,000. At the time of his death, these had been depleted through spending, a decline in the value of his portfolio that was heavily invested in gold (whether someone in their 80s should be investing in gold is another story), and annual gifts to his children, to approximately $350,000. If the mortgage were to be paid off with these remaining funds, the three children not receiving real estate would get about $100,000 each rather than the $300,000 contemplated when the plan was created.

The second glitch is that the professor never transferred any of his property into the trust or executed a will. Whenever estate planners create plans centered on trusts as the primary estate planning document, they also prepare so-called “pour over” wills that simply state that all of the probate property owned by the decedent passes to the trust. Funding the trust during life avoids probate. Executing a pour over will doesn’t avoid probate, but does make sure that the property will be distributed according to the terms of the trust. With no property titled in the name of the trust and no will, the laws of intestacy take over. These say that the entire estate passes equally to the professor’s four children with nothing going to his partner of many years. (If they had married, she would have had rights to a portion of the estate. And, in case you’re thinking about this, she cannot claim to be a “common law” spouse in our state.)

The child who contacted our office would like to follow his father’s wishes, but he’s not sure all of his siblings will agree, especially the two others who would not receive the vacation house. And who knows whether the professor’s plan would be exactly the same had he made it knowing that he had only $350,000 in savings and investments rather than the $950,000 he had when he drew up his documents. Further, in conveying the house to their father’s partner, the children will incur taxable gifts. While given the current estate and gift tax threshold this is probably academic, it may not be for all of the children.

 

I’d argue that this was not a DIY situation. The professor had a complicated plan in mind, one that involved specific instructions with respect to two pieces of real estate, property in two states, and a major beneficiary who was not his child or spouse. While the attorney may not have improved on the drafting of the trust and almost certainly would not have written a better explanatory letter, she would have made certain that a pour over will was part of the plan. She also probably would have asked the professor if he would want a different distribution scheme if his assets were depleted in any way, perhaps eliminating the requirement that the mortgage be paid off before the savings and investments were distributed. While the professor avoided legal fees in drawing up the plan himself, his children will pay more in resolving the problems their father left behind.

Disadvantages of Working with Lawyers

  • They’re expensive (though not nearly as expensive as a plan gone awry).
  • They may make the plan more complicated than necessary
  • They may or may not be efficient and responsive.
  • Traveling to lawyer’s office may be inconvenient.
  • You may feel uncomfortable exposing any dirty laundry or discussing disagreements with your spouse or others in your family.

There is no one right answer for everyone. Whether you choose to work with an attorney or use a DIY plan should depend on the complexity of your situation, the goals you hope to achieve, your comfort level with computers on the one hand and with lawyers on the other, and your ability to pay legal fees.

An Example of When Not to Do It Yourself

 

My firm was engaged to probate the estate of a man who died earlier in the year. I would have liked to have known him. He had been a professor of English at a local college and seemed from his obituary and his estate plan to have been an interesting thinker. His estate plan consisted of a trust he had drafted himself and a letter of instructions. Unfortunately, it did not include a will, which in some-cases wouldn’t matter, but in this case did, as I will explain below. The trust and letter of instructions were clear, written with verve, and consistent with one another. They directed that his home pass to his partner of many years, that his vacation home in another state go to his daughter, who lived there, and that the rest of his property go to his other three children in equal shares after paying off the mortgage of about $50,000 on his home.

Here are the glitches: First, when the professor drew up the plan, his savings and investments totaled approximately $950,000. At the time of his death, these had been depleted to approximately $350,000 through spending, a decline in the value of his portfolio that was heavily invested in gold (whether someone in their 80s should be investing in gold is another story), and annual gifts to his children. If the mortgage were to be paid off with these remaining funds, the three children not receiving real estate would get about $100,000 each rather than the $300,000 contemplated when the plan was created.

The second glitch is that the professor never transferred any of his property into the trust or executed a will. Whenever estate planners create plans centered on trusts as the primary estate planning document, they also prepare so-called “pour over” wills that simply state that all of the probate property owned by the decedent passes to the trust. Funding the trust during life avoids probate. Executing a pour over will doesn’t avoid probate, but does make sure that the property will be distributed according to the terms of the trust. With no property titled in the name of the trust and no will, the laws of intestacy take over. These say that the entire estate passes equally to the professor’s four children with nothing going to his partner of many years. (If they had married, she would have had rights to a portion of the estate. And, in case you’re thinking about this, she cannot claim to be a “common law” spouse in our state.)

The child who contacted our office wanted to follow his father’s wishes, but he was not sure all of his siblings would agree, especially the two others who would not receive the vacation house. And who knows whether the professor’s plan would have been exactly the same had he known that his estate would have only $350,000 in savings and investments rather than the $950,000 he had when he drew up his documents. Further, in conveying the house to their father’s partner, the children would incur taxable gifts. While given the current estate and gift tax threshold this is probably academic, it may not be for all of the children.

I’d argue that this was not a DIY situation. The professor had a complicated plan in mind, one that involved specific instructions with respect to two pieces of real estate, property in two states, and a major beneficiary who was not his child or spouse. In addition, the estate was taxable in our state. While the bulk of the estate consisted of real estate, neither property was liquid. It would seem unfair if the three children receiving the remaining savings and investments also had to pay the estate tax.

While an attorney may not have improved on the drafting of the trust and almost certainly would not have written a better explanatory letter, she would have made certain that a pour over will was part of the plan. She also probably would have asked the professor if he would want a different distribution scheme if his assets were depleted in any way, perhaps eliminating the requirement that the mortgage be paid off before the savings and investments were distributed. While the professor avoided legal fees in drawing up the plan himself, his children paid more in resolving the problems their father left behind.

As it turned out, with some small adjustments all of the children agreed to carry out their father’s wishes with respect to the two properties. In another family, this could easily have resulted in expensive, time-consuming and embittering litigation.

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