An estate plan is a set of very important documents that include:
- Living Trust: Sets out how you want to leave your assets: who gets what and how. It names your successor trustees, the people who will administer your trust if you become incapacitated or when you die. And if done right and is up to date, it will allow your estate to avoid probate, which in California, is very expensive, time-consuming, and a real pain.
- Will: If you have a small estate that will not go through probate, a will may be enough to express your wishes for your assets. And if you have young children, you will need a will to name the guardians to care for them if you cannot. If you have a living trust, you will still need a will, but a special type of will called a "pour-over will."
- Durable Power of Attorney: Authorizes your spouse, family, or friend to manage your finances and pay your bills if you can't.
- Advance Health Care Directive and HIPAA: Authorizes your spouse, family or friend to talk to your doctors and make medical decisions for you if you can't.
Every adult needs some level of estate planning. Young adults just starting out need a basic will, a durable power of attorney, a health care directive, and HIPAA. Once you buy a house, you will need a living trust to avoid probate. Also, in addition to your home, if you have bank accounts, investment accounts or a business worth more than the California probate threshold of $184,500, you will need a living trust to avoid probate. And if you have young children, you will need a will to name your guardians.
How to Set Up Your Estate Plan
You have several options to set up your estate plan:
1. Prepare your own estate plan with a DIY platforms.
2. Have your financial advisor prepare your estate plan through a tech platform.
3. Work with an estate planning attorney.
DIY Estate Planning
If you have a basic estate, online DIY estate websites like Legal Zoom, Wills & Trusts and Nolo Press might be fine. Using Legal Zoom, Wills & Trusts or Nolo Press is inexpensive and basic. And if you have a basic estate, basic documents might work.
Using a DIY estate planning website is also very convenient. You can create your documents on your computer from the comfort of your home - no need to drive several times to an attorney’s office.
The big disadvantage of online document assembly software is the “the documents might work” part. Often with DIY estate planning websites, there is little or no interaction with an estate planning attorney. Which raises the issue: did you click the right buttons and make the right choices?
The thing about estate planning documents is that you don’t know if the documents will work until it’s too late, which means it’s important to have confidence that your estate planning documents will do what you want them to do.
Another disadvantage of using DIY estate planning websites is that you won’t develop a working relationship with an attorney. What if you have questions? What if you need to update your estate planning documents because you had another child, need to change trustees or guardians, need to change beneficiaries, or you buy a new home?
Estate planning is not a static one-time event, it is an on-going dynamic process that will require updates from time to time. Your life, your family, your assets, and the tax laws change, and your estate plan needs to be updated as needed to reflect those changes.
Financial Firm Estate Planning Tech Platforms
Estate planning attorneys have been using drafting software for decades. You can intuitively understand the need for estate planning software for attorneys: to streamline the production of up-to-date documents. The attorneys use their knowledge and experience to draft documents that are consistent with their clients' wishes while complying with legal, tax, and practical considerations.
But in the last few years, there has been a rush to market estate planning tech platforms for financial advisors. Why? What's with the push to get financial advisors to draft estate plans?
Estate planning has been on the radar for venture capitalists and private equity for many years. They did the math. Baby-boomers are getting older, and they need estate planning. Experts predict that the next two decades will witness the biggest transfer of wealth in history. Silicon Valley sees an opportunity. One manifestation of this is the development and marketing of niche estate planning software platforms for financial advisors.
What do these platforms do? They allow financial advisors to generate basic estate planning documents for their clients using "attorney-approved" templates with attractive flowcharts and visuals.
But are the estate planning documents generated by financial advisors effective? You know when you know, and you don't know until incapacity or death, and then if the documents don't work it's too late - the same with DIY estate plans. And what if they don't work? Will the beneficiaries sue the financial advisor for malpractice and the unauthorized practice of law?
These estate planning tech platforms have to be careful not to put their company or their customers, the financial advisors, in a position where they are practicing law without a license, aka the unauthorized practice of law. To hedge against this, the tech platforms instruct financial advisors to act only as estate planning "facilitators" and not as "legal advisors." How do they do this? When is one a facilitator and when does one cross the line and become a legal advisor?
Your financial advisor has your best interests at heart and wants to help you by preparing your estate plan, and his firm won't even charge you for it. But maybe it's a thanks, but no thanks situation. Do you want your financial advisor preparing your estate plan with a tech bro platform that produces templates that a big law firm in Los Angeles promises won't get him sued? And what if you have questions about your estate plan? Can he connect you with the big law firm in Los Angeles? And if he can connect you with the big law firm in Los Angeles, will someone at the big law firm in Los Angeles be able to answer your questions?
Estate Planning Attorneys
Generally, attorneys are better at estate planning. Just like financial advisors are better at financial planning. Good grief - do not seek your attorney's advice for financial planning.
There are exceptions - maybe one. One of my good friends is an estate planning attorney, a financial advisor, and an accountant. But he is not one thing and attempting to be all three. He really is all three. Very unique.
However, not all attorneys who draft estate plans know what they are doing.
There are good estate planning attorneys and not-so-good estate planning attorneys. The not-so-good ones are attorneys who are litigators, divorce attorneys, or business attorneys who don't know estate planning, but they bought software that creates wills. The not-so-good ones are the attorneys who bill you when you ask them questions. The not-so-good ones are the attorneys who never return your calls or emails. The not-so-good ones are the attorneys with egos who talk down to you.
The good estate planning attorneys know what they are doing, they charge you a transparent fixed fee with no billable hours or mystery billing, they promptly return emails and phone calls for free, and they can explain legal concepts and answer your questions as if they are talking to a friend.
Our team of estate planning attorneys brings more than 75 years of combined experience - real, focused legal experience designing and administering estate plans. We all meet weekly to review cases, share insights, and continually refine our knowledge based on what we see actually happens when a plan is implemented. We've administered hundreds of trusts and estates, which gives us a unique and practical perspective: we know what works and what causes costly, painful mistakes.
Estate planning isn’t just paperwork. It’s strategy. It's knowing:
- How to deal with banks and powers of attorney.
- How to draft trust provisions that protect your children’s inheritances from divorce or creditors.
- How to guide you in the design of your living trust so it will actually work.
- How to prevent family conflict through your living trust.
- How California Proposition 19 will affect your real property.
- How to choose the right successor trustees and guardians for your minor children.
- How to title your assets to avoid probate and streamline trust administration.
- How to coordinate your estate plan with retirement accounts and beneficiary designations.
Financial advisors and accountants are crucial. The most effective estate planning happens when a skilled financial advisor, an experienced accountant, and a knowledgeable estate planning attorney work together. Each brings specialized expertise that can ensure the client's objectives are met.
Your estate plan is more than forms cobbled together by a tech platform. It’s your final legally enforceable statement on how you want to protect your family and assets. It's your legacy.