The $39 LegalZoom mistake

The IKEA Trap

You spend two hours assembling an IKEA dresser. Following every picture in the manual, and then getting to the very end, only to realize you’re missing four screws, which makes the whole thing wobble.

Piecing together an estate plan using cheap or free online templates feels productive. That feeling lasts right up until a life event happens. Your family then realizes the legal framework you built is completely unstable.

Why Your Basic Will Walks Right Into Court

Does having a will mean my family avoids court?

No. A will is just a set of instructions for a probate judge. The probate system exists to validate the document and oversee the distribution of your assets. So, only having a basic will means your family goes through the probate process.

And the issue is that probate is entirely public. Anyone can look up the details of your estate. It’s well known that unscrupulous real estate investors often scrape probate records to find grieving families and make lowball cash offers on houses.

Not to mention, the probate process can take six to eighteen months to resolve. Another dangerous peril is that during this time, your assets can also be frozen. Your family may not be able to access the frozen accounts until the court grants permission. And the whole probate process can drain three to seven percent of your total estate (court/attorney fees).

While all of that sounds unpleasant, at least you have things in writing, right? The judge will just follow what’s in the document, right? If you think the judge will simply follow what your will says, then you might be in for a rude awakening.

Will my assets just follow what my will says?

Absolutely not. Beneficiary designations override whatever is written in your will. You might spend time and money drafting a will that leaves everything to your current spouse. Your 401(k) or equity compensation portal might still list your ex-spouse from a decade ago. In these scenarios, that money will very likely go to the ex-spouse. And the probate judge lacks the authority to change this outcome.

The financial institutions that hold your accounts only care about the beneficiary form on file. They do not read your will.

What’s the solution?

Beyond having an airtight beneficiary designation review, revocable living trusts are far too underutilized vs wills. I get it. It sounds like something the “ultra wealthy” would use. But living trusts are much more accessible today for the broad public at a cost that rivals what you would pay for a will.

A revocable living trust is designed to avoid probate entirely (i.e., all those fees and asset freezes we previously noted). And using a living trust doesn’t mean you give up access to the funds (that’s an irrevocable trust - totally different). With a living trust, you maintain total control of your money while alive. You can change the terms of the trust at any time, set up a bank account in the trust’s name, and spend from that account like you would with a normal checking account.

The benefits are that with a living trust, the assets are transferred privately and immediately upon death or incapacitation (among many other benefits). And the fee to set up a living trust is often a fraction of the cost of probate.

*Setting up a trust may help protect your family's privacy and wealth, though the legal outcome depends on proper execution and state laws.

The funding trap

A trust functions exactly like a heavy-duty steel safe. The safe only protects what you actually put inside it. Most people pay to draft the trust, they sign the papers, and then they put the binder on a shelf in the home office. They forget the act of retitling their house and brokerage accounts into the trust's name.

An unfunded trust is just an expensive stack of paper. You need to change the ownership of your accounts from your individual name to the name of your trust.

FAQs

What happens to my unvested RSUs or stock options if I pass away?

The outcome depends entirely on the company's equity plan document. Some companies accelerate vesting upon death. Others forfeit unvested shares immediately. You need to read your specific plan agreement to know exactly what happens to your unvested equity.

Do I need a trust if my net worth is mostly in my 401(k) and my primary home?

Beneficiary designations on a retirement account keep that specific money out of probate. Your primary home presents a different challenge. A house held only in your name goes straight to probate court. Your family cannot sell the property or transfer the deed without a judge granting permission.

Can I just use transfer-on-death designations for all my accounts instead of paying for a trust?

Transfer on death forms work for simple individual brokerage accounts. They fail if a beneficiary is a minor child. Minor children cannot legally own property. These forms also offer zero protection if you become incapacitated. A trust allows your hand-picked successor to manage your finances while you are still alive but unable to make decisions.

Your Next Steps

1. Audit your accounts. Log in to Carta, Shareworks, Schwab, or E-Trade today. Confirm your beneficiary designations are accurate and up to date.

2. Inventory your probate exposure. Make a list of any assets held solely in your name without a designated beneficiary. These are the items that could go straight to a probate court if not planned for.

3. Check your home deed. Pull your property deed if you already have a trust. Check your monthly brokerage statements. Verify the accounts are titled in the name of the trust rather than your personal name.

*This list is for educational purposes only and does not constitute a comprehensive estate plan or legal advice.

Meme of the Week

Securing Your Financial Safety

A basic will is just an expensive ticket to probate court. While a revocable living trust can be a great move, it only protects your family if you take the time to put your assets inside it.

Here’s what I would do if I were you: I would stop assuming a basic template protects your family. You can keep leaving your family's financial future up to a probate judge and outdated beneficiary forms, or you can fix it. If all this sounds like a lot to do on your own, schedule an introductory call today to learn if our services are a good fit for your situation.

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Marcel Miu, CFA and CFP®, is the Founder and Lead Wealth Planner at Simplify Wealth Planning. Simplify Wealth Planning is dedicated to helping employees earning company stock master their money and achieve their financial goals.

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