By Kaye Dent, Dent Law Offices, Ltd.
I regularly see ads on Facebook from companies offering programs for creation of trusts and wills online.
Knowing what the results would be, I clicked through one to see all the details. The business advertises that it can create a plan in as little as 20 minutes. This was the first red flag.
In order to create a proper estate plan for a client, it’s important to take the time to get to know about the client and the client’s family and assets. That alone takes more than 20 minutes.
The program quickly raised another red flag, asking a question to determine if a trust is right for me. The only question was whether I have a home and more than $160,000 in assets. Yes? Then a trust is a “great fit.” Hold it right there, Mister! Whether a trust is a great fit for a client isn’t simply a matter of home ownership or the total value of assets. The client’s family makeup and issues, as well as the TYPE of assets owned, are more important considerations.
I’m going to stop counting red flags. There was one at every turn.
The trust is promoted as avoiding probate and giving assets directly to beneficiaries.
Let’s get a couple things straight:
First, probate is not the big bad monster many trust promoters tell you it is. If you have a trust, your assets will go through a process quite similar to probate, just not through court.
Second, a lot of beneficiaries should never receive assets directly! The reasons are nearly endless.
The software I examined did not allow me to create a joint trust with my spouse, which would have been advisable in some circumstances. That’s an option which should be discussed with an attorney. The software also didn’t allow me to select my Trustee. In most married situations like mine, the spouses are co-trustees of each other’s trusts when there are separate trust. Not always, but most of the time.
The question button in one window didn’t match the issue covered.
When asked the online chat option how to select a successor trustee, the response was basically to select a person over the age of 18, and there was no mention of using a professional or corporate trustee. My son is 18, and I sure as heck don’t trust him with my finances.
Funding is key to a good working trust, and this software provided few details about funding. It offered an option to indicate to put assets, including retirement accounts and businesses, into the trust, but no guidance on whether it’s a good idea in general, let alone in my specific case.
However, the software took an opportunity to try to sell me life insurance. (What?!)
Then we ran into actual danger, not just a red flag. Even though I answered that I have retirement accounts, the software offered to let me distribute to my kids over time, ignoring the complicated rules now governing how retirement assets are treated in trust administration.
More danger became apparent when I reviewed the draft document. I was never asked if my beneficiaries should have powers of appointment, nor whether those powers should be limited or general. Don’t know what I’m talking about? Well, if you’re going to create a trust, you had better! The software automatically included general powers of appointment, which mean that, if I actually use this trust, my kids’ inheritances are not protected.
Additionally, the trust used the wrong term for distributions.
I give this software an “F.” It simply does not provide the planning and protections it promises, and I’ve only scratched the surface. If I had used this trust, I would have paid only about $500, yet it could have cost my kids everything in the end.
If you want a complete trust that will actually work to achieve your goals, see a skilled attorney. Will you pay more than $500? I hope so, because it’s worth much more.
Remember also that another danger of these online systems is that they allow unscrupulous “friends” and family members to draft substandard documents for elderly persons to sign without being screened for competency.