Self-sufficiency and resourcefulness are admirable traits – knowing how to change a tire, wallpaper a bathroom, or use duct tape to fix any number of problems can save both time and money. However, not all tasks should be tackled at home – dental work, anything to do with electricity, and getting bats out of the attic are examples of tasks for which most people should hire a professional. With the proliferation of DIY (do-it-yourself) kits and forms available online these days, estate planning may seem like one of those items that could be handled at home and save a lot of money. Beware – the consequences of not getting it right can be worse than a do-it-yourself root canal! Here are five real examples of DIY estate planning gone bad.
- DIY Power of Attorney resulted in the need for a court conservatorship. The children of an elderly woman who was in a nursing home contacted me to undertake planning to protect assets against complete spend down on long-term care costs. Because of this family’s situation, there was an opportunity to preserve the home by transferring it out of mom’s name even though she was already incapacitated and in a nursing home. Unfortunately, a few years earlier, the children had helped mom “save money” by having her sign a Power of Attorney form they found on the Internet. The Power of Attorney did not include the authority they needed to undertake the planning that would allow them to preserve mom’s $800,000 home against a lien for long-term care Medicaid benefits. Because mom no longer had the capacity to execute a new Power of Attorney, we had to file for a Conservatorship with the probate court. This took a long time, required a number of medical certificates from mom’s doctors, and was expensive. Further, the court appointed another attorney to represent mom’s interests, paid for by mom. All told, it cost more than $7,000 and took approximately eight months to accomplish what could have been done in less than a week for a fraction of the cost if there had been a comprehensively drafted Power of Attorney in place (which would have cost far less than $7,000).
- DIY long-term care planning meant loss of home to Medicaid lien. I recently had a very sad situation where a family lost the home that had been in their family for more than 100 years because they did not seek the advice of an elder law attorney when the mother of my client went into a nursing many years ago. Although Medicaid imposes a period of ineligibility for long-term care nursing home benefits if assets are given away within five years prior to applying for benefits, there are exceptions to that rule. This family would have qualified for one of those exceptions and the home could have been transferred to my client without any penalty. Had that been done, the home would have belonged to my client free and clear of any claim by the state for the cost of the mother’s nursing home care. Unfortunately, I was not consulted until after the mother had passed away. At that point, the Commonwealth had a lien against the ancestral home for an amount that exceeded the value of the property. Once the mother passed away, the opportunity to transfer the home to the daughter under one of the exceptions to the transfer rules and free of the Medicaid lien was lost. The house was sold and the family received nothing – all of the proceeds went to the state.
- DIY estate planning meant loss of benefits for beneficiary with disabilities. I had a client contact me to help her settle the estate of her brother who had passed away at the age of 45 having never married and leaving no children. The brother had prepared his own Will leaving his estate to his two siblings. While it was good that he had the foresight to create a Will, it was not so good that he did not consult with an estate planning attorney. It turned out that one of the siblings was receiving needs-based governmental benefits because of a disability. Unfortunately, this sibling’s entitlement to an inheritance caused him to lose those benefits. While we were eventually able to requalify him for those benefits, we needed to go to court to do so. Further, the solution to the situation most likely means that a large part of the inherited wealth will be taken by the state when the disabled brother dies. With planning, the deceased brother could have created a trust that would have provided for his disabled sibling and ensured that any amounts remaining at his sibling’s death were distributed to his sister and not to the state.
- DIY Will Necessitated Court Permission to Sell Real Estate. I had a client who came to see me because he was named as the Personal Representative (Executor) of his aunt’s Will. The Will left everything to four nieces and nephews, including my client. It was a fairly simple estate – aunty had only her home and a bank account. However, the Will did not grant the Personal Representative the authority to sell real estate. That meant that in order to sell the house, we had to file a petition with the court seeking permission to sell the real estate. This delayed the process and cost the estate several thousand dollars more than it would have cost to have a proper Will prepared by a lawyer.
- DIY Realty Trust created defect in title to property. In the course of updating an estate plan for an new client whose husband had passed away and who had done all of their legal documents for them (no, he was not a lawyer), it was discovered that he had created a defect in the title to their home as a result of a series of transactions conveying their real estate in and out of trust. We had to engage the services of a real estate attorney to clear the title and record a variety documents with the Registry of Deeds. The cost of this was about $4,000 – far more than it would have been to engage an attorney to do it correctly from the beginning.
The above are just five examples of what I see in my practice on a regular basis. While it’s great to save money, be careful about being “penny-wise and pound-foolish” – getting it right the first time will usually save a lot of time and money in the long run. And remember, getting it right the first time requires seeking the assistance of an experienced estate planning attorney. Next to DIY documents, documents created by attorneys who do not practice primarily in this area can also create more problems than they solve.
Attorney Suzanne R. Sayward is certified as an Elder Law Attorney by the National Elder Law Foundation, a private organization whose standards for certification are not regulated by the Commonwealth of Massachusetts. She is a partner with the Dedham firm of Samuel, Sayward & Baler LLC. This article is not intended to provide legal advice or create or imply an attorney-client relationship. No information contained herein is a substitute for a personal consultation with an attorney. For more information visit www.ssbllc.com or call 781/461-1020.
October 2015