Friday, February 13, 2009

The Seven Costly Mistakes Of Using An Online Internet Service To Write Your Will Or Trust

So the time has come for you to start thinking about writing your will and/or living trust, which is a very important step to take in ones life. In deciding whether to use the internet to write your trust, will or estate plan, the old adage holds true: “A man who represents himself in court, has a fool for a client.”

Many people ask me, “Why do I need a living trust”. That is a very good question, because the answer is not always the same for every client. If you own Real Estate in California or any other state, it is important to hold title to that property in a trust. The main reason is that when you die, your intended heirs cannot transfer, sell, or refinance that property until they obtain a Court order allowing them to do so.

This process is what we call "Probate". The probate process allows heirs to have the real estate and other personal property (ie: bank accounts, mutual funds, and CD’s) to be transferred to their name. The downside to probate is that it takes about 18 months to be final and the costs are extreme.

For example, the cost to probate an estate worth $500,000 would be close to $20,000. This would include attorney’s fees, court filing fees, the posting of a bond and appraiser fees.

The cost of a living trust properly prepared and funded by an attorney for a $500,000 estate would cost about $1500.


Many people are the do-it-yourself type. This is a nice approach if you have unlimited time and do not care if you have made the proper decisions in changing title to every asset that you have worked so hard to achieve. If your re-titling project goes awry, your heirs may be required to go to court to persuade a judge of what you really intended to happen after you have died. The internet services do not provide the service of re-titling your assets into your trust.

A trust must have your assets funded or transferred to the trust for it to work properly. Assets have legal title, such as your home, money market accounts or stocks and bonds. The title to your assets must be changed over to your trust.

When you transfer title to the assets, you must have legal documentation properly filed and or recorded with the proper agency. If you miss something, or fail to record a deed, that asset will not pass to your heirs through the trust and will be subject to the probate process. For example, the cost to probate a asset worth $250,000 would be close to $12,000. This would include attorney’s fees, court filing fees, the posting of a bond and appraiser fees.

An asset that is left out of the trust will have to pass through probate. This will cost money and take time to finalize the probate process. In addition, the asset (ie: stock account) will be frozen during this process. So if you have a stock that you would like to sell because it is selling at a high price, you cannot sell until the probate is final. Again, this may take 18 months, and during that time, the stock market may change and the price of your stock could fall.

Estate planning attorneys usually need about four to eight hours to properly prepare, execute and fund a living trust. The time needed by an individual that has not had the training to prepare a trust could be more than twenty hours. And there is no guarantee that the self-written trust was properly completed. It is no different than you driving down the road and the “check engine” light goes off and you pull off onto the side of the road. You know that you can try to diagnose the problem on your own or you can take the car to a well trained mechanic that will charge you a fee to fix the problem with your car. You may be able to discover and fix the problem on your own, but how long will it take? Will you do it right the first time. If you don’t do it right, who will you hurt by your mistakes?

If you miss something in putting the trust together, you are only adding more time onto the project, because the trust will most likely be thrown into the probate court. Time is something we do not have an unlimited amount of.

In my practice, I often am faced with having to probate a trust for a family that was prepared by a non-attorney or internet service. In probate court, judges do not like trusts that were not prepared by attorneys. I have had the opportunity to see how probate judges view trusts prepared by non-attorney’s and look for defects that will allow the trust to be invalidated.

Again, if the trust is invalidated, the assets are subject to the probate process and more time is added to the botched estate plan.

The internet services do not look at your net worth or entire estate to spot potential tax traps that could eat up your hard earned assets. A benefit of hiring an estate planning attorney to prepare your estate plan, they will advise you on what to do if your estate is subject to federal estate taxes.

As of 2007, an estate worth over 2 million dollars will be taxed under the federal estate tax at rates of up to 49%. This means that, those assets that you have been taxed on during your lifetime, will be taxed again after you have died.

If you make the right choices with trusts, gifting and insurance, you can eliminate and/or minimize these exorbitant taxes. I can assure you that an online service will not provide this valuable information to you.

When you go online to do estate planning, you are filling out a series of standard questions. One question is, “who do you want to be in charge of the distribution of the assets after you have died?” There is no discussion as to why you choose that particular person.

As an attorney, I take a very active role in helping my clients decide on who is the right person or persons to act as the successor trustee. Is this person ethical? Does this person have a business or financial background? Do they have outstanding debts or creditors suing them? Do they cave into the pressure of others? Are they reliable? These are all very important questions to consider when choosing your successor.

I was once hired to sue a successor trustee for the beneficiaries, because he was diverting monies from the trust to pay for his gambling losses. This lawsuit cost the beneficiaries tens of thousands of dollars because the wrong person was appointed as the trustee and the trust was written by a non-attorney.

In my practice, I receive many calls each month from a disgruntled beneficiary that wants to sue the successor trustee for embezzlement of trust assets. An internet service does not spend the time counseling the client on the pitfalls of choosing the wrong successor trustee.

Another important question and decision is how should assets be distributed to an eighteen year old beneficiary. A typical eighteen year old lacks the ability to invest assets and manage an estate. A properly drafted trust can avoid the assets being squandered by a young inexperienced beneficiary. By using an attorney and not the internet, you can rest assured that your hard earned assets will not be lost at the craps table in Las Vegas.

Another issue that is typically missed on an internet trust application is what to do if a beneficiary is disabled or becomes disabled. Persons with disabilities can qualify for aid from the government if they have a limited amount of assets. If your beneficiary is disabled and then has an asset transferred to him or her via a trust, then that disabled person may no longer qualify for the state aid.

In our client interview, there is always a discussion about the age, maturity, and mental capacity of your intended beneficiaries. I also should mention about looking out for the opportunistic gold digger {daughter-in-law/daughter-in-law}. These people are always discussed in our consultation. I have never seen an internet application that inquires as to whether you trust your son-in-law.

By accepting the role of a trustee, that particular person is taking on responsibilities and potential liability if that trustee/successor trustee fails to follow state laws, the terms of the trust or does not pay creditors. The trustee can be sued in a court of law for failing to prepare the proper accounting documents on behalf of the trust.

Non-attorneys and online services do not have court experience and do not have the insight on how to counsel clients on how to avoid these pitfalls.

In my practice, I have the ability to share with clients the mistakes that I have seen made by others that were unrepresented and the consequences that were doled out due to those mistakes. For example, states provide statutes that define the duties and responsibilities of a trustee, if the trustee fails to act or acts negligently, the trust beneficiaries can sue the trustee for negligence.

When you use a website to write a trust and things do not turn out properly, you have little recourse in correcting the mistakes. You do not have a warranty. Even if the website offers a money back guarantee, a refund of $300 will not get you very far in the probate court.

Attorneys are required to maintain good standing with the state bar and attend continuing legal education seminars on the recent changes in the law. Attorneys also typically carry malpractice insurance. I always let my clients know that I carry malpractice insurance and that they are covered if a mistake were made. In the planning stages of your estate plan and trust preparation it makes no sense to be penny wise and pound foolish.

The living trust is usually not the only document that is needed to complete your estate plan. Every family has different needs and an in depth discussion is necessary to spot all of the legal issues. It is important to add durable powers of attorney for asset management, advance health care directives, pour-over wills, irrevocable life insurance trusts, and special needs trusts are other documents to be considered. To make this decision, the client needs full disclosure as to why these documents may be necessary.

I also treat a client engagement as an opportunity to help educate that person on each of these documents and how they work and the importance of each tool. If I am not properly passing on my knowledge to my client, I am not doing my job. I enjoy helping people. That is why I became an attorney. It takes time to explain the importance of these estate planning tools. It is not fair to the client if they do not have a chance to explore all of their options.

I have used these internet sites before, I have even owned my own internet site. The goal of owning an internet site is to be able to sell products or services without having to develop a working relationship with the customer. It is all about generating income without having to answer questions. In the area of estate planning, if your questions are not answered you are headed for failure.

One last parting thought is regarding the problems with identity theft and fraud. When you set up a trust, you must disclose information about you, and your assets. In today’s world of crimes being committed on the internet, it does not make sense to disclose your sensitive information to a company that you know nothing about. You do not know who the owner is and you never get to meet their staff. Would you give your birth date, social security number and the whereabouts of your assets to a perfect stranger? When using the internet to set up your trust, you will be required to disclose private information to people that you do not know. This in of itself is a scary proposition.

I hope this information was helpful and encourages you protect yourself and those who are, or will be a part of your will or living trust. For information, please visit

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