Online Estate Planning
The Wall Street Journal ran an article recently about purchasing Will forms from various online or self-help services. The article has received criticism from some in the estate planning community. Here’s what I think people should understand about the estate planning process and where potential traps may lie.
The article outlines a couple with a non-taxable estate and no children, a house, life insurance and retirement accounts. The hypothetical couple apparently want to leave the house to the surviving spouse, one-half of the other assets to the surviving spouse and simultaneously leave the other half of the remaining assets to nieces and nephews. The author seems to feel this is a very simple situation. Of course, every one of my client’s believes their own situation is just as “simple.” However, after I meet with a client, and we discuss everything most say “Wow, I never knew it was so complicated.”
If Mr. and Mrs. Hypothetical want such an estate plan, I’d first ask why they want that specific plan. I’d mention that most married couples want their entire estate to pass to the surviving spouse, not merely the house and half of the other assets. The reason is simple – most spouses want to have as many resources, i.e., money and other assets, as possible for their future financial security. I’d probably recommend that the nieces and nephews only receive something if both spouses are deceased.
The next question could be, Should those nieces and nephews receive their inheritance outright or in trust? If they are minors and they receive the inheritance outright, their parent or guardian may control the funds for them until they reach age 18 or perhaps a guardianship or some form of conservatorship could be set up. At age 18, however, they are free to spend the money as they please. Most of my clients don’t want their children to receive their inheritance at 18 with no strings attached. A better alternative is some form of trust where there is guidance as to how the funds are invested and distributed to the beneficiary.
Another issue is the life insurance. Life insurance passes to the beneficiary designated in the policy, not pursuant to a Will. So if our hypothetical couple thinks part of the insurance proceeds will find its way to the nieces and nephews, it probably won’t happen. IRAs and 401k’s, as well as any type of account with beneficiary or payable on death provisions, also bypass your Will in most situations, unless your estate is the beneficiary. In many cases, you do not want your estate to be the beneficiary of such assets.
These are just some of the issues that would need to be addressed to produce an estate plan that truly meets the clients’ needs. So will the online estate plans accomplish what our hypothetical client desires? And, is want the clients want the best estate planning option? In all likelihood, the answer to both is probably no. But these clients wouldn’t know that without competent guidance.
