Can’t I just go online and get a form?” Smart clients like ours would never ask this question! Right…? Of course they would! Even our smart clients are tempted by the allure of seemingly quick, easy, and affordable solutions. Everybody likes a deal, and technology and marketing are so sophisticated it’s easy to imagine that “formbotzoom.com” might be the answer. Just look at the legalzoom reviews. But let’s draw back the façade just a bit and take a closer look.
LegalZoom and other “document preparers” want you to believe that the process of drafting legal documents is as easy as filling in the blanks on a standardized form. However, our experience tells us that this is a fallacy. Generally, non-lawyers do not have the knowledge or experience to correctly fill out even the very best forms. Interestingly, LegalZoom seems to already know this. On its input page, there is a warning: “80 percent of people who fill in blank forms to create legal documents do so incorrectly.”
Moreover, when issues or questions arise, who are you going to turn to for help? LegalZoom? Let’s take a look at some disclaimers taken directly from LegalZoom.com.
“LegalZoom is not a law firm, and the employees of LegalZoom are not acting as your attorney. LegalZoom’s legal document service is not a substitute for the advice of an attorney.”
“LegalZoom is prohibited from providing any kind of advice, explanation, opinion, or recommendation to a consumer about possible legal rights, remedies, defenses, options, selection of forms or strategies.”
“At no time do we review your answers for legal sufficiency, draw legal conclusions, provide legal advice or apply the law to the facts of your particular situation. LegalZoom and its services are not a substitute for the advice of an attorney.”
“…the legal information on this site is not legal advice and is not guaranteed to be correct, complete or up-to-date.”
“LegalZoom is not responsible for any loss, injury, claim, liability, or damage related to your use of this site or any site linked to this site, whether from errors or omissions in the content of our site or any other linked sites, from the site being down or from any other use of the site. In short, your use of the site is at your own risk.”
Experience also tells us that canned forms are generally far from ideal. Consider Greg’s story:
Greg is married and has two children: one from a previous marriage and the other from his current marriage. Greg is also a licensed attorney, and the Practice Development Director at the Minnesota State Bar. Greg is not an estate planning attorney, but as an experiment, he decided to purchase a $69.00 Will from LegalZoom. Greg posted a copy of the Will on his law blog so that his lawyer buddies could give him their input. Not surprisingly, there were plenty of problems. For instance:
- It failed to include a self-proving affidavit, which means that witnesses would have to be tracked down in the event of his death to testify to the validity of the will.
- It failed to provide guidance about beneficiary designations on non-probate assets, which pass outside the will.
- It failed to include a provision that would allow him to direct the disposition of personal property in a separate document.
- It failed to address the possibility that his children might predecease him.
- It failed to address the possibility of the birth or adoption of additional children.
Truth: If we did this, our malpractice rates would skyrocket.
Do it yourself legal forms are not the worth the risk. Anecdotally, we estimate that approximately 50% of the fees we earn in estate administration matters are the result of well intended but misguided DIY planning. It’s a pay now or pay more later scenario. Perhaps we should send LegalZoom a thank you note!
As attorneys, we do more than just fill out a form; we draft a document that is right for you. We give you our best personalized advice based on years of experience and your unique circumstances. We stand behind our work—no disclaimers. Most importantly, we will be here when the chips are down. Yes, we cost more than formbotzoom.com. Why? Because you and your family are worth it.
Imagine preparing to travel on an incredible vacation – one for which you have spent your entire life planning. Now, imagine reaching your destination only to discover that you brought nothing with you but an empty suitcase! You have no clothes, no toiletries, and no other personal items that help make your travel experience easy and comfortable. Believe it or not, this is a perfect metaphor for your estate planning.
Think of your Trust as the suitcase and your entire estate plan as the vacation. You might spend a great deal of time on your estate planning, just as you would spend time planning your vacation. You want every detail accounted for, and you want your travel to be streamlined and worry-free. Much like your suitcase, your Trust is designed to help you organize your belongings and be sure they make it to the intended destination. However, you must actually put your belongings into the suitcase for it to serve its purpose. Similarly, you must actually fund your Trust with your assets to be sure your estate will ultimately be distributed in accordance with your wishes.
Sure, if you arrive with an empty suitcase, you can probably buy new clothes and toiletries. However, you can never be certain they will be the items you truly want, and you run the risk of not being able to get certain items at all. Additionally, if you have to buy all new clothes and personal items, you will incur added expenses that would normally not have been necessary. These same concepts apply to your Trust and the administration of your estate. Without a properly funded trust, you can never be certain that your assets will be distributed in the manner that is truly in keeping with your wishes. Furthermore, having an unfunded Trust will almost certainly result in additional legal services and fees that will be required to administer your estate. Your beneficiaries may be left with far less than you hoped and intended for them to receive. Or, even worse yet, there is the possibility that certain of your intended beneficiaries may not receive anything at all. Your Trust will not necessarily control assets that were never properly funded to the Trust.
We place great emphasis on the Trust funding process as part of our estate planning services, and we work closely with all of our clients to be sure all of their assets are “pointed in the right direction.” Please contact us to schedule a time to discuss your estate plan and your funding. We would be pleased to assist you in fulfilling all of your estate planning needs. Let’s pack that suitcase!
It is so important to have a revocable living trust. We got a call last year from a middle-aged man whose parents had died and left him a nice inheritance. His parents had a trust which said, “After both of us have died, give the money in the trust to our son.” He was about to receive his money, but he was worried, because he had recently been sued, and had just gotten a court order/judgment against him. He asked us, “Can my creditors get their hands on my inheritance?” Answer: “Yes. Hand it over.” His parents had hoped that he could use that money to have a nice retirement, but he never saw a dime of it.
His parents gave the combination to the “safe” to their son’s creditors.
Trusts do many things, but one thing they do particularly well is protect inheritances from the creditors of the trust beneficiaries. Suppose the parents’ trust had said, “After both of us have died, continue to hold the money in trust for our son, and use it for his benefit for the rest of his life.” If they had done that, then their son’s creditors would have been out of luck.
But wouldn’t that have involved a lot of trustee’s fees? Not necessarily. If the parents had named a Corporate Trustee (bank or trust company), they would have charged their typical fees of around one to two percent of assets, which (1) is probably about what an investment portfolio manager would charge anyway, even without a trust, and (2) seems like a small price to pay to avoid losing the inheritance to creditors. Corporate Trustees are well worth their fees, especially when the beneficiary is a minor, incapacitated, a spendthrift/gambler/shopaholic, naive about investing, in a shaky marriage, or in a high risk occupation.
If using a Corporate Trustee does not appeal to you, you can name the beneficiary as Trustee of his or her own inheritance and still receive the creditor protection. In 2010, the Arizona legislature passed a statute that says, in most cases, a beneficiary’s creditors cannot get at an inheritance that is held in trust, even if the beneficiary is also the trustee! That sounds too good to be true, and maybe some day a court will rule that it is too good to be true. But for now, the smart plan is to leave your children their inheritances in trust for their lifetimes, either with a family member, friend or corporation as Trustee, or even with your children as their own Trustees.
Before you ask: no, you can’t use your trust to protect against your own creditors, unless you make the trust irrevocable and give up all control and access – which most people aren’t willing to do. But to protect your children, review your “safe” to make sure you haven’t given the combination to your children’s creditors. (And maybe drop a hint to your parents that you wouldn’t mind getting your inheritance in trust instead of outright.)