Don DrakeCOVID-19 and the Dangers of Do-It-Yourself Estate Planning
Updated: Apr 24, 2020
How quickly things change. 2020 started off with a bang. Unemployment was a thing of the past, the stock market was hitting new highs on a nearly daily basis, consumer confidence was at an all-time high, and then came the coronavirus.
Since late February, we’ve all been forced to think seriously about our health, loss of employment, the loss of our life savings in a business venture that was running on all cylinders, or even worse, facing our own mortality or that of a loved one. Quarantined in our homes with little more to do than watch endless hours of talking heads on television spread doom and gloom and in most cases, fake news has left many of us anxious and depressed as fear of the unknown mounting with each newscast we watch. And...we had a sudden need to put our affairs in order -- just in case.
Although nearly 98 percent of those who contract COVID-19 experience mild symptoms and fully recover from the virus, we wonder if we will be in that number or the dreaded two percent who fared worst? We see the story of people on respirators which only increases our sense of urgency – what if we fell sick and were not able to make our own decisions?
We go online and begin to explore estate planning, after all, we know the truth is that everyone really should have an estate plan, even before this virus invaded our society. Now that we made a decision, the only thing left to do is put one together. We go online again, checking out elder law attorneys but now another problem, we really don’t want to go out of our quarantined cave or the elder law office we call is closed due to the pandemic. What to do? We make the decision to use an online Do-It-Yourself estate planning service. That's it, problems solved…or did they just begin?
“Estate planning is so much more than just a will," said Attorney RJ Connelly. “A comprehensive plan includes multiple documents, including a revocable trust, sometimes called a living trust, financial powers of attorney, healthcare powers of attorney, and more. All these documents are important and serve a role in a good estate plan.”
And has the coronavirus changed things when it comes to estate planning?
“If anything, it brings to light how important having the financial and healthcare powers of attorney are. You need to have someone who can handle financial decisions, such as paying bills or moving money around, and making medical decisions for you if you are quarantined in your home or admitted to a hospital and become incapacitated,” Connelly said.
But what about these online estate planning sites or programs you can order from online retailers? You can do it yourself and save a few dollars. After all, these programs and sites claim they have real attorneys backing up their products.
“A comprehensive personal estate plan can be financially beneficial for people, so looking for a bargain online may not be a good idea since a mistake could prove quite costly,” stated Connelly. “Here is what I tell my clients, you don’t know what you don’t know. You may have an excellent idea about where you want your assets to go after you’re gone, but what you may not know is all the case law and legislation that are a part of your state’s probate code. No one wants to have relatives or loved ones engaged in years of time-consuming and expensive litigation due to mistakes made with online estate planning products.”
But again, these sites state upfront that “real attorneys” on the staff read and approve of the plans. Isn’t that good enough?
“I always tell individuals to check out the disclaimers on many of these sites, that's where the real story is,” said Connelly. And just what do these disclaimers say? Here are some examples that you may find (if you look hard enough because they try to disguise them):
This site is not a law firm nor is it a substitute for a law firm or an attorney;
This site is not able to provide any type of opinion, advice, guidance on legal rights, advise you on what forms to use, or what choices you should make;
Any communication on this site is not protected by the attorney-client privilege;
Your individual state's laws may not apply to this site's documents or instructions;
You agree to this site’s Terms of Use by using our documents (in which lies the devil in the details).
Even after all the warning bells and whistles, we decide to move forward anyway and use the software or the online estate planning company. After all, how bad could it be? Well, you may be surprised. Let’s look at a few of the horror stories:
It was around 2015 when Paul, who was estranged from one of his children, decided to disinherit him due to a substance abuse problem and his criminal activity. He bought a software program from a big box store, loaded it onto his computer, and followed the prompts. He began to list his assets, making gifts to his other children but forgot some important holdings that he had such as stock in various tech companies he had purchased decades earlier. Those shares, which had grown to be worth hundreds of thousands of dollars, ended up being the largest part of his estate when he passed.
Because Paul did not understand how important it was to have a residuary clause (a residuary clause says that “after everything else is paid for and if there’s anything left, it goes to…), and the software did not explain it in a way he understood, so the will he completed lacked this important piece.
Just what happened? The stocks that Paul owned passed according to the laws of intestacy, and the son, who the father wanted to disinherit, received over $200,000. He blew through this money in less than a year, had multiple overdose episodes which landed him in intensive care and left him with brain damage as a result of cerebral hypoxia. This is what Paul was trying to avoid after his death. (Plus, in speaking with an elder law attorney, he could have learned about Special Needs Trusts or other ways to accomplish the goal he was seeking).
In another story, CNBC told the tale of a man who did his own will online and made the mistake of giving his girlfriend partial control of his assets. Without his knowledge, the girlfriend promptly transferred ownership of a huge chunk of his estate to herself. When he died, there was almost nothing to give his children.
Finally, many of us remember Charles Kuralt, the beloved CBS News correspondent most widely known for his long career with CBS, first for his "On the Road" segments on The CBS Evening News with Walter Cronkite, and later as the first anchor of CBS News Sunday Morning. In 1997, several weeks before he died, he wrote a letter to a woman named Patricia Elizabeth Shannon, his mistress for nearly three decades, promising to leave her 90 acres and a renovated schoolhouse in Montana, where they spent much of their time together.
After his death, Kuralt’s family and Shannon spent over six years in court battling over this letter and whether it was a valid amendment to the will he had prepared in 1994. The court awarded Shannon the property worth $600,000 but forced the family to pay the estate taxes. So even the rich and famous don’t take care of minor details that can affect family members long after they are gone.
“Those who promote the on-line products argue that a do-it-yourself will is better than nothing,” stated Connelly. “Unfortunately, they’re only partially correct because a mistake can be so bad it could have long lasting emotional and financial consequences for a family.”
Let’s take a look at what documents should be in a comprehensive estate plan.
Financial Power of Attorney
A financial power of attorney is a legal document that gives an agent the authority to carry on a person’s financial affairs and protect their property by acting on their behalf. This POA allows the agent to pay bills, write checks, make deposits, sell or purchase assets, or sign any tax returns.
“Without a financial power of attorney, there is no person to act on the behalf of the person who is incapacitated,” said Connelly. “This means a family must request that the probate court appoint a guardian who will have these powers, a process that is time-consuming and can be very expensive.”
Healthcare Power of Attorney
Like a financial power of attorney, a healthcare power of attorney is a legal document that gives an agent the authority to make healthcare decisions on your behalf if you are incompetent or become incapacitated. If you are over the age of 18 and don’t have an HCPOA, again, your family members will need to request that the probate court appoint a guardian with these powers.
Living Will (Advance Healthcare Directives)
A living will, also known as an advance healthcare directive, allows you to specify what kind of end-of-life treatment you may want or may not want should you become terminally ill or permanently unconscious and cannot survive without some form of life-support.
“If you don’t have a living will, any decision to remove or continue life support is left in the hands of your healthcare agent,” said Attorney Connelly. “By developing this document, you make your wishes known and take that decision out of the hands of your family members, which can be an agonizing and emotional decision for them to make.”
HIPAA Waiver
The advance health care directive will contain language that allows your agent to access your healthcare records, but, it’s also a good idea to have this HIPAA document.
“Many medical facilities will refuse access to medical records without a stand-alone HIPAA waiver. A stand-alone HIPAA waiver allows your chosen agents and family to have access to these records so they can speak freely with your medical providers should incapacity occur,” said Connelly.
Last Will and Testament
The last will and testament is a legal document that allows you to state where your property will go upon your death. A will also allows the appointment of an executor who will oversee this distribution.
“Nearly everyone has assets that need to transfer after death,” said Connelly. “Without this document, there exists no direction as to how this property will pass. The court will end up deciding on who will administer the estate.”
Even more important, a will allows you to appoint a guardian to take care of minor children. “Without a will,” Connelly continued, “a parent's ability to have a say in the process is limited and the court makes a decision as to where the children go.”
Living Trust
A revocable living trust is a legal contract that you make with yourself to create an entity to hold your assets. You can change your trust at any time, which is why it’s called revocable, and you can set it up to outlive you.
Connelly explained, “if you become incapacitated or are not able to manage your estate, the living trust avoids the need for a court-appointed conservatorship. The successor trustee steps in and manages your affairs without the involvement of the court, which avoids the time and expense associated with probate. A trust also affords you privacy regarding the details of your estate since it avoids the need for probate, which is a public process.”
As you can see, a comprehensive estate plan can be complicated and is not a one size fits all process. However, online forms and software are designed to cover the most basic of needs and intentionally kept simple to accommodate a wide variety of users.
Obviously, everyone’s needs are different and what may work for your family will most likely not meet the needs of your brother, your in-laws, or your friends. Do-it-Yourself estate plans are not designed to account for these personal differences or choices.
Finally, state laws vary widely when it comes to things like property ownership, probate, estate taxes, gift taxes, and inheritance taxes. One well-known estate planning software program generated a revocable living trust for a couple who lived in a “separate property state”. The software itself was developed in a state that was a “community property state”. Unfortunately, the software-generated trust agreement missed that and turned the couple’s trust into a horror story to administer.
There are also legal formalities required to write and sign a valid trust agreement. Again, state-specific issues can affect the trust, including the definitions of descendants, common-law marriages, etc. Generic estate plan forms and programs that are not dedicated to a specific state's laws cannot possibly address these issues.
"If you have used an online estate planning product, at the very least, have an elder law attorney look at it to make sure it covers everything you need," said Connelly.
The bottom line, saving time and money is usually a great thing in most situations, but the long term result of doing your own estate planning could prove to be financially disastrous and end up costing you far more than paying an attorney to develop one with you in the first place.
Thank you from Connelly Law Offices, Ltd. to those who work in all senior care facilities, healthcare facilities, and to our first responders!
Connelly Law Offices is open for all elder law and fiduciary services. We practice all CDC hygiene and personal safety guidelines. New client meetings can be done through phone interviews or using video programs such as ZOOM or Skype. In-office meetings can occur for emergency reasons, again, using social distancing and all CDC guidelines.