Do-It-Yourself Estate Planning – A New Low

This morning, I noticed a Google advertisement that really got my blood boiling.  The ad was for LegalZoom – one of those online companies touting Do-It-Yourself legal documents, including estate planning.  It’s bad enough that they encourage people to play attorney for a day, but this new ad even suggests that you can “Make a Will in Minutes!” with “3 Easy Steps.”

The dangers of creating documents such as Wills, Advance Directives, Powers of Attorney, etc., on your own, far outweigh any perceived cost savings – which is the main reason people attempt to do it.  First of all, each state has its own requirements for each of the various legal documents.  If you create your own and don’t meet the specific requirements for Maryland, for example, your documents may not be effective.

Similarly, Medicaid is very state specific. The rules that govern Medicaid in Maryland can be completely different from the rules in Washington, DC or Virginia. And, as we all know, laws are changing all the time!  Even “simple” estate and Medicaid planning isn’t simple. There are legal requirements for documents, gift tax, estate tax, capital gains tax and income tax issues in even small estates, Medicaid issues, etc.

If that isn’t compelling enough, consider this:  Many lawsuits have been filed against LegalZoom, including a class action lawsuit in California charging that the company engages in deceptive business practices and is practicing law without a license. The suit, filed by Katherine Webster, niece of the late Anthony J. Ferrantino and executor of Mr. Ferrantino’s estate, charges the company with deceptive business practices and practicing law without a license.  The lawsuit also claims that LegalZoom (and other similar providers) make misleading advertising claims.  The complaint includes over 3,000 individuals.

Knowing that he had only a few months to live, Mr. Ferrantino had asked Ms. Webster in July 2007 to help him use LegalZoom to execute a will and living trust. Based on LegalZoom’s advertising, Ms. Webster says she believed that the documents they created would be legally binding and that if they encountered any problems, the company’s customer service department would be of assistance.  (They guaranteed 100 percent customer satisfaction and that the quality of their documents were dependable and of the same quality as any attorney’s.)

Surprise, it turns out that the financial institutions holding the assets would not recognize LegalZoom’s documents as valid and, therefore, the trust was not funded upon his death in 2007.

Ms. Webster was forced to them hire an estate planning attorney who had to petition the court for a post-death funding of the trust.  The attorney further discovered that the estate planning documents had not been properly witnessed.  In addition, the attorney had to convince the asset holding financial institution to transfer the funds, all of this costing the estate of Mr. Ferrantino.  The lawsuit claims that “nowhere in the manual do defendants explain that using LegalZoom is not the same as using an attorney and that its documents are only ‘customized’ to the extent that the legalZoom computer program inputs your name and identifying information, but not tailored to your specific circumstances,” and further states that the “customer service representatives are not lawyers and cannot by law provide legal advice.”

As you can see, DIY estate planning can end up costing you (and your heirs) significant amounts of time and thousands or millions of dollars in taxes or probate costs or additional nursing home expenses.  And, of course, by the time you’re gone, it’s too late.  The lesson?  Investing in an experienced estate planning is money well spent!

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