Although a shocking number of U.S. consumers do not currently have a will, this trend could change as online estate planning becomes increasingly popular. Estate planning is the process people take to protect their dependents, finances and estate in the event of their incapacitation or death. This process includes a number of tasks, such as drafting a will, establishing a guardian for surviving dependents, setting up trust accounts for beneficiaries to limit estate taxes, naming an executor of the estate, setting up a durable power of attorney (POA) and more. Yet according to a recent study, more than half of Americans (anywhere from 55% to 64%) have never even created a will. To top it off, nearly 10% of the folks who do have a will created it so long ago that it is out of date.
So why are many Americans neglecting to draft their wills, much less handle other important estate-planning tasks? It’s all about the Benjamins. As attorney fees continue to mushroom, most families simply cannot afford traditional estate planning. In fact, the average billable hour for U.S. attorneys increased by more than 10% between 2010 and 2014.
Online Estate Planning to the Rescue?
With the explosive growth of virtual legal services, many Americans are turning to the internet to handle estate planning on the cheap. In 2016 hiring an attorney to draft a simple will often runs between $500 and $1,000. On the other hand, consumers can draft, print and execute an online will for an average of $60 and sometimes as little as $20.
Perhaps that’s why Rocket Lawyer, one of the most popular online legal sites, reports that more than 913,000 users drafted wills on its website in 2012 alone. But is online estate planning really the smartest choice? The answer is that it depends.
3 Ways to Decide If It's Right
Before you decide, ask yourself the following three questions. (For more, see Are Do-It-Yourself Online Wills Right for You?)
1. Do I Have a Simple Situation?
If you have a fairly simple life situation, online estate planning may be a viable option for you. For instance, if you currently do not have any minor children and own a relatively small estate (a total value that wouldn’t be subject to estate taxes), you probably don’t need to hire an expensive attorney. Instead, you could use an online legal service to complete a few estate-planning essentials, including your will and an advance directive.
Also known as a healthcare proxy or a living will, an advanced directive allows you to designate a person to make healthcare decisions for you if you are incapacitated. As with your last will and testament, it’s important to update your living will occasionally, because it may expire or your circumstances may change.
2. How Big Is My Estate?
If you own assets and insurance in excess of the current estate-tax exemption ($5.45 million per individual for 2016), online estate planning probably isn’t your best bet. You could benefit greatly from hiring an estate-planning pro who will walk you through your options and discuss ways to leave money to your loved ones while minimizing estate taxes. (For more, see How Estate Taxes Work, A Real Life Example.)
This might include setting up a trust, a legal arrangement that allows you to determine how your assets will be distributed after you die. Trusts are also beneficial because they can help minimize gift and estate taxes and avoid probate. For instance, if you establish a revocable living trust that terminates when you die, the property in the trust will pass immediately to your named beneficiaries. This could save a lot of time and money for your heirs when the time comes.
3. Do I Need Expert Legal Advice?
Even if you have a fairly small estate, you may still require expert advice due to certain circumstances. For instance, if you are divorced with minor children, part of a blended family, own real estate outside of your state or have a family member who suffers from a disability, online estate planning is probably not your ideal option. Why? Because when you handle your estate planning online, you will not be able to include complex wishes in your will or receive expert advice from a professional. On the other hand, if you meet face to face with an attorney, you can discuss your specific situation, and he or she will help you to create a customized estate plan tailored to your needs.
The Bottom Line
Although online estate planning can certainly save you considerable time and money, it’s not the smartest option for everyone. Before you choose to go that route, carefully consider your current life situation, the size of your estate and other circumstances. In some cases hiring an attorney is well worth the additional cost. For more, see Estate-Planning Software: Pros and Cons.