DIY Estate Planning: Why “Doing It Yourself” Isn’t Always the Smartest Move
I certainly understand the appeal of DIY estate planning. With online templates, how-to videos, and fill-in-the-blank legal forms, it can seem like a cost-effective, efficient way to get your affairs in order. After all, why pay for professional help when you can just download a document and fill it out yourself?
But here’s the thing: estate planning is more than paperwork. It’s about strategy, timing, and understanding the implications of every decision—legal, financial, and personal. And when it’s done without the right guidance, it can create more problems than it solves.
As a Certified Executor Advisor, I help individuals and families navigate estate planning and administration. I don’t draft documents or give legal advice, but I do see what happens when well-meaning people try to handle things on their own. Often, they don’t even know what questions to ask. And one tool I’ve seen misunderstood more than once is the alter ego trust.
A Real-World Example
A family reached out recently. They were exploring options to simplify the estate of an aging parent whose memory had started to decline. The parent still owned a rental property and also had a partial interest in the family home. There were debts involved — mortgages, some outstanding taxes, repair bills — and concern about what would happen if something happened before the rental was sold.
They’d heard about alter ego trusts and wondered if that could be a simple way to protect the home, avoid probate, and keep everything out of court. They were even considering setting it up themselves using information they’d found online. This is where DIY can become dangerous.
What Is an Alter Ego Trust?
In Canada, an alter ego trust is a living trust available to individuals aged 65 and older. You can move assets into it while you’re alive, remain the sole beneficiary, and then pass those assets directly to others upon your death, without the requirement of going through probate. Want to read our earlier article about alter ego trusts?
It sounds like a great solution – and sometimes, it is. But this isn’t a plug-and-play tool. It’s a complex legal instrument, and the consequences of using it incorrectly can be serious.
What Can Go Wrong with DIY Estate Planning Involving Trusts?
When people take the do-it-yourself route, especially with something like a trust, they often overlook key legal and financial issues that a professional would catch. Here are just a few examples:
1. Capacity Is Critical
To create a valid trust, the person creating the trust must have the mental capacity to understand what they’re doing. If there’s any doubt, due to age, illness, or cognitive decline, the trust can be challenged or overturned.
In the case I mentioned, the parent’s memory issues raised red flags. Without a medical assessment and clear documentation, any disgruntled party could later argue that the trust was invalid.
2. It Won’t Eliminate Debt
There’s a misconception that trusts can magically “protect” assets from creditors. They don’t. If there are mortgages or tax debts, they can follow the assets, trust or no trust. Moving a property into a trust doesn’t make those obligations disappear. Some types of trusts (e.g., spousal, Henson trusts) may protect against future creditors or certain claims, but only if structured correctly and not set up with the intention of dodging existing debts. That’s why these must be carefully designed with legal advice.
In this situation, the rental property had not yet sold, and there were concerns about foreclosure. If the trust was seen as a last-minute effort to avoid paying creditors, it could have been subject to challenge.
3. Intent and Timing Matter
If a trust is created too close to a financial or health crisis, courts may question whether it was created voluntarily or with the proper understanding. In cases of undue influence, lack of capacity, or fraudulent intent, the trust can be contested.
Without proper legal advice, these risks are often overlooked in DIY situations.
The Hidden Cost of “Saving Money”
Yes, hiring a lawyer to draft your estate documents or trust will cost more than filling in a template. Legal fees for creating a trust might range from $2,000 to $5,000 or more, depending on complexity. And, of course, there are ongoing fees for taxes, etc.
But the cost of doing it wrong? That can include:
- Court challenges that drag on for months or years
- Legal fees that far exceed the original cost of doing it right
- Delayed access to funds or property for beneficiaries
- Broken relationships and family conflict
Worse, if your trust is declared invalid, the estate may end up going through probate anyway, defeating the very purpose of setting it up. If your will is declared invalid, you essentially die intestate, and the government will take over until and unless a family member steps up — and it may not be someone you would choose!
When a Trust Makes Sense—and When It Doesn’t
Alter ego trusts have legitimate benefits. They can:
- Bypass probate
- Preserve privacy
- Provide continuity if capacity is lost
But they also come with administrative complexity, ongoing legal obligations, and tax considerations. They aren’t a substitute for a full estate plan and they certainly aren’t something to set up casually without help.
In the case I mentioned, the trust might have been a viable solution if the parent still had full capacity, if creditor risk had been addressed, and if everything was clearly documented with legal support. But without those safeguards, it could have created more problems than it solved.
The Bottom Line
DIY estate planning may save money upfront, but it can cost far more in the long run — financially, legally, and emotionally. Tools like alter ego and other trusts are powerful, but they’re also complex. They need to be used correctly, with expert guidance, and with your full situation in mind.
Need help figuring out what questions to ask?
As a Certified Executor Advisor, I help you understand the options, uncover the risks, and connect with the professionals you need to make informed, confident decisions.
If you’re considering a trust, or any estate planning tool, don’t rely on what you’ve read online or downloaded from a website. Get the right advice. Ask the right questions. Understand the full picture. For step-by-step guidance that covers far more than just documents, explore my Comprehensive Legacy & Lifestyle Planning Package — a proven way to protect your legacy and give your family peace of mind.
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Disclaimer: This content is for general information only and is not legal, financial, medical, or tax advice.
