Online Estate Planning? Buyer Beware

Online Estate Planning Considerations

Clients sometimes ask us about online estate planning companies that they see advertised on the Internet and in the media. They also encounter companies that promote “Living Trust packages” at seminars or other public places.

We have a great deal of experience with reviewing these kinds of arrangements and we have seen serious problems. Online “fill-in-the-answer” estate planning can undoubtedly reduce document costs. However, we have noticed that both the informa­tion provided by these companies and the “final” documents for the buyer frequently contain mistakes.

Examples of typical problems we have seen, much to the surprise of clients who thought their “documents” were acceptable, include:

• Failure to tell clients that their Will does not control all of their property. For many people, the opposite is true. For example:
  • Houses, bank and brokerage accounts titled jointly to two people, with rights of survivorship, will pass to the survivor and not under the Will. For instance, some people add a child to an account for ease of managing the account during the parent’s lifetime. They do not realize it will pass to that child at death, outside the Will. Online services and companies that sell “Living Trusts” often fail to explain this common misstep.
  • Life insurance passes by beneficiary designation, not by Will.
  • IRAs, retirement plans and annuities pass by beneficiary designation, not by Will.
  • For many people, this mix of assets makes up most, if not all, of their estates and will not pass under their Wills.

• Failure to explain that if you sign a Living Will in some states or complete the form incorrectly, the individuals you name as health care agents will not control whether a doctor “pulls the plug.” This sensitive subject often takes more time to talk through than all of the rest of the client’s estate plan.
• Failure to advise that if your Will relies on a “testamentary trust” in some states, your beneficiaries and trustees may be required to report to the probate court annually until the trust terminates, which might not be until a child is 30 or 35 years old. A Living Trust avoids this issue.
• Failure to analyze tax issues, which can result in severe tax problems. For example, credit shelter tax planning must include analysis of property holdings to make sure that titling and beneficiary designations are correct for each spouse. This is one of the most serious deficiencies we see in plans that purport to be “A/B” or credit shelter trust plans. The tax costs can be in the hundreds of thousands or even millions of dollars and could have been avoided.
• Failure of property to reach the persons for whom it was intended. This is the most serious failing of all. We have seen documents where there are no provisions for alternate recipients (when the clients clearly would have named an alternate if they had been properly advised) and where terms are ambiguous, which can trigger disputes or the need for court interpretation.

Technology can and should be used to reduce costs when possible. Taft relies on technology, including a custom-designed assembly system that uses Taft’s own provisions. But the plan will always be custom to you, not a fill-in-the-blank form that par­rots your own words back to you. Equally important, lawyers trained in estate planning point out issues that otherwise would not be addressed and that determine what the documents actually need to say.

As is the case with all responsible estate planning lawyers, Taft estate planners do not like to see planning that was done with­out regard to these issues or the heartache and expense that often follow.

As the saying goes: caveat emptor (buyer beware).