A frequent mistake people make is relying too much upon self help. Most self-made plans or informal arrangements sound good on the front end, but turn out bad in the long run.
For example: Don’t put property into joint names with your adult child so that it automatically passes to the child when you die. People think this is a quick and easy way to pass property and “save” money on attorney fees, but this idea has many pitfalls. If the child dies before you, you’re back to square one. Perhaps not a problem if you have time to fix that, but what if you’re in an accident together and you never get a chance to change things? Or what if you just never get around to it? Now your heirs will have to probate your assets, which will cost them far more than it would have cost for you to hire a lawyer for estate planning.
Creditors are also a consideration. Did you know that your child’s creditors could use your property to collect on the child’s debts? If your child is on title, the child is an owner. Creditors can lien real estate for collection of a judgment. They can garnish bank accounts. When that happens, it’s up to you to try to undo it. Proving something is really all yours, recovering funds, releasing a frozen bank account, or removing a lien can be very difficult and does not always work. It usually requires help from a lawyer – costing more than you would have spent on an estate planning attorney.
Another example? Don’t leave everything to one adult child because that child “knows what you want to do with it” and will just divvy things up when you die. This plan takes many forms, including joint title, naming just the one child in a self-made Will, or simply telling that child what you want without discussing it with anyone else or taking any formal steps. What could possibly go wrong? Plenty! For one thing, as with the prior example, the child could die before you or at the same time as you. You’re also putting your child in a difficult position if there is any dissension at all between your children. You may not think that your little darlings would behave that way, but money and grief do strange things to people – tempers flare, siblings don’t get along, and sometimes the child who was supposed to divide the property decides to keep everything instead. Stories of feuding among children abound, ultimately costing expensive legal fees and leaving behind broken relationships. Even if you’re certain this won’t happen to you (famous last words), consider the other extreme: Will your child feel so guilt-ridden or self-effacing that your child gives everything to the siblings and keeps nothing?
Don’t assume your spouse or partner can just get everything then setup a plan for the joint assets after you die. The chance of a common accident or illness is too high. Think of how often you and your significant other engage in joint activities. Not just higher risk things, like rock climbing, skydiving, or scuba, but everyday activities, like riding in a car, attending a theme park, taking a plane or having a boat trip. How about natural disasters? There may not be time or ability to plan if both of you are involved in a calamity. What if you don’t die, but you become incapacitated instead? Now you have two troubles: no planning for incapacity and no planning for inheritances. You also can’t assume your significant other will inherit everything from you, even if he or she survives you. Most states have laws that restrict or limit the inheritance given to same-sex couples or when the deceased also had children (even adult children).
More good advice: Don’t try to write your own Will or Trust. This is a recipe for disaster! If you fail to follow required formalities, the document will be invalid. If there is anything ambiguous in what you wrote, a court will decide what you meant. That is expensive and like rolling a dice. If you think it’s easy to be clear, think again. Take the case of the man whose Will directed that his daughter receive a large monetary gift if she survived him by 30 days, and that his second wife receive everything else. Daughter died on day 28. Who gets her share? The Will said wife gets everything “else.” The Will did not say what to do if daughter did not survive. Does the second wife get it or does it go to the man’s children from his prior marriage? Where do you think those children think it should go? A court will probably have to get involved and this is going to cost a whole lot more than having a lawyer write the Will!
You shouldn’t try to be your own lawyer any more than you would try to be your own dentist or surgeon. As the saying goes, “You get what you pay for.” If you think do-it-yourself estate planning software or online service is the answer, you should read the evaluation conducted by Consumer Reports.