It’s become a do-it-yourself world. Why should estate planning be any different? you may ask. My one word answer is this: flexibility. In my experience, none of the DIY options provide enough of it.

As illustrated in the previous post entitled A Probate Fees Primer, avoiding the time and expense associated with probate is a common estate planning goal for most people. You may be thinking I want our house to go to my spouse if I die first, and she wants it to go to me if she does. Or you’re not married and thinking I want my adult kids to get my house when I die. In either situation, a transfer that occurs outside of probate is desired.

Since property held by joint tenants automatically passes to the survivor(s) when one of them dies, the reasoning goes, why not just record a joint tenancy deed and skip the whole trust nonsense? My surviving spouse (or kids) will automatically become the title owners of the property when I die without any probate proceeding.

And I can do the same thing with my bank accounts – by naming who I want the account to go to as my pay on death (POD) beneficiary.

And since much of my wealth is my retirement benefits which can’t be held by a trust during my lifetime anyhow, I really don’t need a trust, or any of that other paperwork. That “estate planning” stuff is for other people, not me.

In the process of preparing the joint tenancy deed, most of the savvier single DIY folks will discover (usually when preparing the Preliminary Change of Ownership Report that must be submitted with the deed when presented to the County Clerk for recordation) that listing your adult child(ren) as joint tenant(s) is a change of ownership for property tax reassessment purposes. It’s also a gift that’s subject to federal gift tax reporting requirements. And not only that, but now your house is subject to being taken by one of your child’s creditors. And your child can, intentionally or unintentionally, do something that severs the joint tenancy, creating all kinds of unforeseen problems.

Some of these folks then hear the siren’s call of the transfer on death (TOD) deed as a potential DIY substitute, especially upon learning that the change in ownership, tax, and other complications associated with joint tenancy aren’t an issue with a TOD deed, which can also be revoked if you change your mind about the gift.

The one thing that can still foul up a DIY “plan” — big time — is incapacity. The do-it-yourself set-up doesn’t provide for what happens when you lose your capacity to revoke the TOD deed so that the house can be sold and you can be moved to a memory care environment. And the do-it-yourself set-up doesn’t provide a mechanism for updating the beneficiary designation on the IRAs and 401(k) plans after your named beneficiary predeceases you but you’ve lost the capacity to direct such a change.

Given the fact that people are living longer, but not all of those years are with full capacity, a thoughtful estate plan includes provisions for the possibility that the settlor will lose capacity at some point before they die. It considers and coordinates plans for assets that can and should be held in trust for maximum flexibility, and assets that can’t be held in trust during the owner’s lifetime, such as retirement benefits and life insurance policy proceeds.

A friend recently shared with me that her uncle, an estate planning attorney who’d lovingly and diligently cared for his incapacitated wife in their home for the past several years, had recently died. This event left management of her aunt’s care to her two cousins, who fortunately are also kind and compassionate men.

Even if my friend’s cousins are able to rent out their mother’s house on her behalf, the rental income wouldn’t cover the cost of a memory care facility. There are additional assets that would cover the additional amount, but they’re held in her aunt’s extremely well-funded retirement accounts. Unfortunately, her aunt no longer has capacity to seek increased payouts to herself from the plan provider.

If her sons are able to cover the additional expense from their own funds, any reimbursement they receive via the retirement accounts at their mother’s death will be greatly diminished because whatever remains in the retirement accounts will need to go through probate after she dies.

This is because my friend’s aunt no longer has sufficient capacity to execute an updated beneficiary designation form, the forms on file designate her (now- deceased) spouse as the primary beneficiary, and don’t name a contingent beneficiary. Under the plan contract, when a named beneficiary doesn’t survive the plan holder, the funds pass to the plan-holder’s estate when the plan holder dies.

And as illustrated in the previous post entitled A Probate Fees Primer, statutory probate fees will substantially erode the estate, diminishing the amount paid out to the people established as the decedent’s heirs during the probate process.

Given that their mother’s physical health is quite robust, my friend’s cousins will likely begin a court proceeding to have one or both of themselves appointed as their mother’s conservator. The uncertainties associated with that undertaking are beyond the scope of this post, but what is certain is that the costs will far exceed what it would’ve cost to have a set of comprehensive estate planning documents prepared and executed when they had capacity.

My hope is that this manifestation of the old axiom failing to plan is planning to fail will inspire you to take appropriate action now, and that going forward you’ll have a clearer understanding that the DIY path is full of pitfalls that your loved ones would really rather avoid.

Let’s work together to get your plan in place. Save your do-it-yourself energy for the garden.