Do you enjoy do-it-yourself projects? Are you contemplating a new project of do-it-yourself estate planning? Do you believe that it is probably better to DIY an estate plan than to not have an estate plan at all? Unfortunately, this may not be true. By writing your own estate plan, without seeking counsel from a qualified Alabama estate planning attorney, you may run into a lot of issues in the future.
One issue might be that because what you wrote in your DIY estate plan was unclear or against legal statutes, your heirs may have to go to probate court before a judge who will be making decisions on what happens to your estate. To make things worse, your heirs could be stuck with what you wrote even if the end result is unfair and not what you intended. Beneficiary designation is particularly an area where this can be an issue. Let us explain how.
The following are three reasons why a DIY estate plan can backfire because of your beneficiary designations.
1. Not Knowing The Rules In Regard To Beneficiary Designations. The biggest reason why DIY estate planning may backfire on your beneficiaries is because you did not know that the rules on beneficiary designations always govern what happens to your estate. For instance, when you open a bank account, a brokerage account, or a retirement plan, you will be asked to designate one or more beneficiaries. Whoever you write down in that beneficiary box is the person or persons who will receive the remainder of the account when you pass away. This next part is extremely important, it does not matter if you write a different name or names in your will or estate plan! Whatever is written on the beneficiary designation form for any account is what will happen. If you have a DIY estate plan, you may not realize the rules, and think that you have taken care of your beneficiary designations, when you really have not. Your heirs do not need to go through this if you meet with a qualified estate planning attorney now.
2. You Never Updated Your Beneficiary Designations. In respect to beneficiary designations, you have gone over the beneficiary designation rules and you understand that your estate plan has to match what you put on the forms for your accounts. However, your DIY estate plan could still backfire when it comes to making regular updates. You must remember that every single time you decide you want to change a beneficiary designation you have to do it both on your accounts and in your estate plan. This may be avoided if you discuss your estate planning needs with a qualified estate planning attorney.
3. You Decide To Simplify Everything, Make Your Estate The Beneficiary. Now you might decide to make everything simple by just making your estate the beneficiary of every account. Be careful, though, if you do this in your DIY estate plan you could run into unintended tax consequences. Consult an estate planning attorney for more information.
At the end of the day, legal planning is not just for you. Instead, it is for the ones you love most. If we can answer any questions for you on putting this estate planning in place, please do not hesitate to let us know. For more information, please reach out to our office and schedule a time to meet.