The BBB on Estate Planning – a solid C

This morning I came across this article on estate planning advice by the Better Business Bureau.  I certainly endorse the idea of urging people to do proper planning, but articles like this can sometimes do more harm than good.  I give a grade of C (mediocre).

Here’s the text of the majority of the article, with my comments in bold:

An estate plan can be as simple as drafting a will or as complex as setting up a trust and a living will. BBB offers the following guidance on the basic components of an estate plan and advice on choosing what is necessary for different situations.

Wills can be complex also, and can contain trusts that take effect at death (testamentary trusts).  Also, the first sentence implies that a will and a living will are mutually exclusive, which of course is not the case.  The only source of true estate planning guidance should be a well-qualified estate planning attorney.

Will

At the very least, anyone who has assets that they would like to pass on to specific individuals should create a will. A will can allocate assets as well as establish guardianship of children. Most wills have to go through probate after the individual’s death. In probate, a court oversees the payment of any debts and distributes inheritances—the process can last several months.

This is basically accurate, but it’s not really the will that goes through probate, it’s the assets (depending on what type and how they were owned), And in many cases, probate can last for a couple years.  This is one reason I generally counsel the use of living trusts to avoid probate.

Living Trust

While a trust might sound like something only wealthy people need, it’s actually a tool for anyone who would like to set conditions on how and when their assets are distributed. A trust can also help reduce the amount of taxes paid on the inheritance and does not have to go through probate—unlike a will. Examples for creating a trust include wanting to give a child their inheritance over time, rather than in a lump sum, and restrict how the money can be spent.

This is misleading.  A will can also contain provisions that set conditions on how and when assets are distributed (a testamentary trust).  In addition, a living trust in and of itself does nothing to reduce inheritance (estate) taxes. Trusts or other provisions that can save estate taxes can also be contained in wills.

Living Will

A living will provides a way for an individual to communicate their desire for life-saving measures in case they are incapacitated. In addition to a living will, individuals can also assign medical power of attorney to someone they trust who can further ensure that their wishes are fulfilled.

Actually, a living will normally states one’s desire to not have life-prolonging measures.  There’s no mention of HIPAA restrictions on sharing health care information, however, and the need for a blanket HIPAA Authorization.

For simple estates, many Web sites offer an inexpensive do-it-yourself approach to creating a will; for more involved estates, it’s best to enlist the help of a lawyer. BBB advises researching any estate planning companies or lawyers first at www.bbb.org before paying for assistance.

Beware of the websites.  Using a website to do your estate planning is like diagnosing and treating yourself after reading WebMD.  In, the North Carolina State Bar has stated that Legalzoom is violation of the law.  Click “Continue Reading” to view the text of a letter sent to Legalzoom in 2008.

Also, to be accredited with the Better Business Bureau, a business must pay a fee.  Therefore, lack of accreditation should not be viewed as a negative factor.  Finally, don’t just use any lawyer – with a board certified estate planning specialist you know that he or she has extensive knowledge and experience in estate planning.

After creating an estate plan, BBB recommends communicating the terms of the plan with the family members and loved ones it impacts. An estate plan needs to be revised every time the individual moves, changes marital status or is affected by major financial changes, such as investments or buying or selling a business. An estate plan will also need to be reviewed if anyone the estate plan affects undergoes major life changes such as marriage or death.

Communication with family members is generally good, unless you think it will start a family feud.  Regular review and updating of estate plans is also important because of changes in the law.

Bottom line – it’s a good idea to try to educate about estate planning before meeting with a lawyer, but don’t rely on the Internet alone for your estate planning.  There’s no substitute for the services of a knowledgeable and experienced attorney.

The North Carolina State Bar’s 2008 letter to Legalzoom:

“Legalzoom’s conduct…is illegal in North Carolina and must end immediately; Specifically, Legalzoom may not prepare or offer to prepare legal documents to North Carolina residents or for use in North Carolina, including but not limited to articles of incorporation or organization, deeds, wills, trusts, or court pleadings, including divorce complaints. Legalzoom may not offer to provide any legal services in North Carolina or represent that its services have been reviewed by an attorney or are legally sufficient for the customer’s legal needs. If you continue your activities, the State Bar may seek a court order to perpetually enjoin your unlawful conduct, as the Bar is authorized to do pursuant to North Carolina General Statute Section 84-37 and Chapter 1, Subchapter D, Section .0200 through

.0207 of the Rules and Regulations of the North Carolina State Bar. Please also be aware that the unauthorized practice of law can be prosecuted as a criminal misdemeanor offense pursuant to North Carolina General Statute Sections 84-7 and 84-8 (copies enclosed).”