We both own real estate, artwork, cars, investments, etc. and no children and want to make sure we plan for each others financial and tax safety, should something happen to one of us.
We're also wanting to set up an LLC on one of the homes to use as a rental investment property. He feels we don't have to spend thousands to set up a proper trust and can do it on Legal Zoom, but I'm worried as I keep hearing that it's not that easy to do.
What are the possible consequences of doing this ourselves? This is an area that is totally out of my realm of expertise.
You really should seek professional help through an attorney in your jurisdiction to create the trust and other documents for you. The Legal Zoom trust may work for you, but how do you know if it does? Although many trusts contain some of the same provisions, each trust I draft is uniquely tailored to the client's needs. Another way to clarify what you are doing is what if you bought a pink blouse from your favorite department store. Would it work well for you? Yes. But will it work well for a different size woman, let a lone your boyfriend? No. Unfortunately, it is not so easy to see if the Legal Zoom trust fits your goals or needs.
To answer your question as to what can go wrong if you choose a trust that doesn't work for you; an effective trust should give you control over your property while providing security for your loved ones. A defective trust will not accomplish the following:
1. Provide for you if you become incapcitated.
2. Upon your death, it should avoid probate if it is adequately funded. (Minimum probate in Arizona costs an average of $3,000 - $5,000 and often much more.)
3. It should transfer your property as you wish.
4. It should provide protection of the property your heirs receive against creditors, divorce, bankruptcy, etc.
5. It should minimize or eliminate estate taxes.
6. It should give you peace of mind.
If your Legal Zoom trust is defective, you will spend much more than the cost to create the trust correctly in the first place. The potential taxes, probate, and litigation from a disgruntled heir would be significantly more than any amount you save. This is especially true considering the sizable assets you mentioned. Most of all, I don't think you will ever have the peace of mind that you should have knowing it was done right.
Look, lawyers of course are going to tell you to use a lawyer, but that doesn't mean we are not correct. I have no financial vested interest in telling people in AZ to use a lawyer and I'm still telling you all the lawyers telling you to use a lawyer at telling the truth. How's this for yet another analogy: do you butcher your own meat? Do you do your own plumbing? Do you fix your own car? Do you write your own computer software? No? Did not think so. I don't do any of these things so I hire professionals. It's possible that you can learn enough about something to do it correctly, but I doubt you have the time to learn enough at this point in your lives. If you do a bad plumbing job in your house that was a DIY job you could cost yourself from hundreds to thousands of dollars. If you do bad DIY estate planning job you could cost yourself a lot more. Lawyers are not selling Ginsu knives - if you lost $50 its not a big deal. Estate planning is one of the bigger financial decisions of your life (next to purchasing a home or car, or taking out a mortgage) so its probably one area where cutting corners is not too smart.
Establishing an estate plan on your own is an option, but having it reviewed by an attorney licensed in the State where the trust is established can save you from making numerous amendments and restatements of the original trust. A trust written by an inexperienced person can have numerous consequences (improperly funded trust, tax implications, accidently disinheriting a loved one) which cannot be fully explained here because not all estate plans are the same. Although it may seem inexpensive now to use other methods to create a trust, having an attorney to refer back to on a personal basis can be reassuring. Also, one of the reasons trusts are created is to avoid probate...this can be costly and time consuming. Investing in a well established trust now can lessen the possibility of going through the probate process in the future.
This is obviously an area that is outside of your boyfriend's area of expertise, as well. That is the case with probably 95% of the population. Lawyers spend thousands of dollars to educate themselves and keep up to date on estate planning laws and techniques. Unless you are willing to do the same thing, you are FAR better off consulting with an expert to determine how best to proceed.
You do not have an easy situation to plan.
What are the possible consequences of doing it yourselves? 1) You somehow manage to get things set up correctly in a way that will satisfy your objectives. (I view your odds at about 5%). 2) Anything else. This could include your documents not be valid at all. It could include them doing something completely different than what you intend, resulting in your family members or the state receiving some or all of your estate. It could result in your eventually getting things the way you wanted them, but only after spending thousands of dollars to do so.
I believe that your boyfriend has an incorrect impression as the cost of estate planning. It may be FAR less expensive than he believes. The whole point of DOING this, however, is to make sure that, if something happens, your estate plan will achieve your objectives. If you cannot be sure that is the case, why would you do this?
Some reasons NOT to use internet forms or office supply forms:
1) YOU do not understand what the forms are for, how to properly set them up, (do any follow-up work that is necessary, or choose whatever options are available to you;
2) The forms may or may not be specific to your state's laws. If they are not, then your state's laws might alter the effect of your forms by nullifying certain provisions. This may or may not affect the distribution of your estate(s).
3) There is no attorney to answer any questions you have, to follow up with if there is a problem, or to stand behind their product.
4) These forms are USED when you are either incapacitated or deceased. At that point, it is generally not possible to change the forms or correct any problems. The key is setting things up correctly in the first place.
5) You may have questions about amending or updating your documents in the future. Without an attorney, there is no one to ask, and no one to make the changes.
You are not simply paying for a form. You are paying for knowledge, experience, expertise and advice. With the internet and office supply forms, all you GET is the form. I would not want MY family to rely on that. Knowing and having seen all of the things that can go wrong, (and having helped MANY clients who tried to do their estate planning "on the cheap"), I would urge you to do this the right way, so you do not have any regrets, down the road.
As the old saying goes "You get what you pay for." There are many questions that you need to be asking in order to properly create a full and valid Trust - many of these questions you may not even know you need to be asking. The long term effect of a properly drafted Living Trust far outweighs the immediate cost of creating such an important document.
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