Here’s a question I’m seeing more and more from my readers…
“Is it a good idea to use do-it-yourself software or websites in preparing your estate plan?”
The answer is both Yes, and No.
First off, estate plan preparation software for individuals is nothing new. It has been around since the early days of the personal computer and went online as the internet boomed.
Many estate planners understandably raise cautions about the software.
They don’t necessarily allege there are mistakes in the most used software. Instead, estate planners like to point out that users might make mistakes or not know to take all the actions that would benefit them.
A trained and experienced estate planner might develop a better plan.
Also, the software isn’t going to help with tax planning.
I’ve reviewed and used several of the estate planning software tools over the years. I am most familiar with Nolo’s Quicken WillMaker, but there are others.
I conclude that, as with tax return preparation software, the programs are worthwhile for many people but not everyone.
Many of the estate planning programs are created with the guidance of estate planners and other experts. The programs recognize that the rules vary from state to state.
One of the first steps is to enter your state of residence, and the software prepares documents using the laws of that state.
Each program contains explanations and guidance that help you decide which documents and options to select for your goals and situation.
The estate planning software available is very useful for young adults who don’t have a lot of assets or complicated estates.
They need only basic, traditional estate plans, and don’t need to spend a lot of money seeking legal advice.
The software also can be good for many older people who don’t have complicated estates and families.
It can be used to set up a living trust to hold most assets and a will to cover other assets and issues.
You also can prepare advance medical directives, powers of attorney and other key documents.
Estate planning software should work fine in basic, straightforward situations, such as when you plan to leave everything to your spouse and to your children if your spouse pre-deceases you.
Variations of that basic situation also can be implemented using the software.
But there are other situations in which you probably don’t want to use do-it-yourself software. Someone who wants to set up an irrevocable trust to protect assets and manage them for years should work with an estate planning professional.
(That’s particularly true if you want to leave instructions or limits on distributions of income and principal.)
When you own one or more small businesses, commercial real estate, a valuable collection, or other complicated assets, you should have an estate planning professional advise you and prepare your plan.
You’re also likely to want to use a professional if you want to set up a charitable trust.
People who’ve had more than one spouse, and especially those with children or stepchildren from more than one marriage, also would benefit from consulting with an estate planning professional and might not be able to do all they want with the estate planning software.
Many of the estate planning programs don’t seem to be equipped to prepare documents for most of those situations.
For many people, documents prepared using the estate planning software certainly are better than no estate plan at all.
But do-it-yourself estate planning tools do have limitations, and there are situations when working with a professional estate planner is the best move.
Whether you use the software or a professional, there’s always more to the estate plan than preparing the documents. Be sure you actually transfer legal title to assets to a living trust.
Also, wills and several other documents have to be witnessed or notarized in most states to be effective.
Of course, let your executor and a few other trusted people know where your documents are kept, so they’ll be available when needed.
In next week’s issue of Retirement Watch Weekly, I’ll discuss how to avoid electronic mistakes that can be both costly – and delay the time it takes to administer an estate.
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