Many of us spend memorable weekends on do-it-yourself (DIY) projects, from installing a garbage disposal to removing wallpaper in a bathroom. During the COVID-19 pandemic, DIY home renovations took off as more than 60% of homeowners embarked on home improvement projects. However, most of us can likely agree that some things are better left to skilled experts, such as working with electricity or gas, both of which require a high degree of expertise for safety.
Just like home renovations, investing and estate planning are two areas that many U.S. adults have become emboldened to try themselves with the innovations of online investing and estate planning tools. There’s a time and a place to do it yourself, even in investing and estate planning, but it’s important to know the conditions for success, risks, and limitations so you can make wise decisions. The potential consequences of DIY in these two areas can be more significant than a few trips to the hardware store!
When DIY Investing Makes Sense
The 401(k) retirement investing industry has done a good job providing basic tools and resources for plan participants to make solid long-term decisions. Of course, in your retirement account, taxes aren’t an issue, so you don’t have to worry about that level of complexity, and your goals often are straightforward — maximizing the value of your plan given your expected and desired retirement timeline.
Many 401(k) platforms provide a basic tool for investors to see if they’re on track to meet their goals for retirement based on how much they’re contributing and the way their portfolios are invested. That’s an area where it makes sense and the tools and resources are there.
Of course, not everyone needs a professional investment management firm. Many investors with straight-forward financial situations and confidence in their investing knowledge prefer low-cost providers and discount brokerage firms. However, I often find some investors focus on getting the lowest fee without really understanding the range of services that a wealth management firm provides for what is typically a very nominal differential in cost.
For instance, when working with First Business Bank’s Private Wealth group, you have access to a full team of advisors to assist you and your family with all of your personal deposit and borrowing needs, as well as planning expertise to set your priorities and help you stay on track. You also have access to our Trust Advisors to help you pass your wealth along to your heirs in the most advantageous way. A full-service provider brings much more to the table for a fee that’s highly competitive with almost any other option.
For that fee, you also get a personal team who knows you and your family, and understands your goals and what you’re trying to achieve with your investments. We’re a team of experts always working on your behalf and ready to answer your questions. These are all benefits that aren’t available with DIY investing.
When DIY Estate Planning Makes Sense
I spoke with Christine Waldschmidt, JD, an experienced Trust Advisor in our Private Wealth team to get her input about DIY estate planning.
Situations in which DIY estate planning is a safe option are less common, according to Waldschmidt. An experienced estate attorney, Waldschmidt said there are two situations where a selfdrafted estate plan could work.
“There’s so much complexity within estate planning, with significant legal and financial ramifications, that unless you are an estate planning attorney or you have no assets and no beneficiaries, doing it yourself puts you at risk,” she said. “Most people don’t fit into those two categories, so it’s rarely your best option.”
Sometimes people try to manage their estate through joint titling of property or transfer-on-death designations.
“From a DIY standpoint, many people feel that they can accomplish their estate planning goals with strategic titling of their assets,” Waldschmidt said. “There are some things you can do with titling in joint tenancy with right of survivorship and also with transfer-ondeath designations. Utilized properly, these can be effective tools, particularly if you have a very simple situation, such as a surviving spouse with one child and everything is going to that child. They might do transfer-on-death designations to that child, and if it’s an adult child who is competent, things might transfer in a pretty straightforward manner.”
A Word About DIY Wills
Handwritten wills are probably a relic of the past as they aren’t accepted in many states, including Wisconsin, Kansas, and Missouri. But a will, which legally dictates your wishes regarding your assets and descendants, is only one estate planning tool. Without a will, the state you live in decides what to do with your estate, which may not be exactly what you planned.
“All assets owned at the time of your death are subject to probate, so if you have a will, it will go through probate court,” Waldschmidt said. “The court will look at the terms of the will and the property will be distributed according to those terms. If you don’t have a will, the state makes one for you according to their intestacy statutes, which differ from state to state.”
The potentially dangerous DIY practice is completing a form online when you have a complex situation that really should be handled by an estate planning attorney.
“I see a lot of risk because people will spend $500 on these documents online, print them, fill in a few blanks, sign, and they truly believe they have completed their estate planning,” Waldschmidt said. “Most people are not experts to really understand what all the terms mean. There’s just such a huge margin for error and there’s so much at stake. Many people do not realize they might save a few hundred or a few thousand dollars upfront by trying to figure out how to do it themselves, but they may very well end up costing their family thousands and thousands of dollars after the fact cleaning up the mess.”
Working with an estate planning attorney to create a trust will allow, in many cases, your relatives to avoid settling the estate through probate court, which can be a lengthy process.
Where to Start for Reputable Estate Planning
When you DIY home renovations, you’re likely to ask trusted friends and neighbors for a licensed electrician referral they like, but there are other options to find the right attorney for your needs.
“I absolutely recommend going to your bank’s trust department,” Waldschmidt said. “One of the things we do within First Business Bank’s Private Wealth group is connect our clients with estate planning attorneys. These are attorneys we’ve worked with and known for years, some for decades, and we’re familiar with their levels of expertise and their particular skillsets. We can really match up clients with the right attorney.”
Not all estate planning attorneys are the same and some have specialized skills you might not need in your case.
“Not everyone needs a $600-an-hour guru who can do the best-and-brightest, ahead-of-the-curve charitable gift tax planning, estate tax planning, and trusts,” Waldschmidt said. “But if you do need that, you want to know who to go to. Some people just need more basic, competent service and we can match them, so I feel like your bank trust department should steer you in the right direction.”
Getting Started Investing Wisely
As Senior Vice President - Portfolio Manager & Market Strategist, I write and present often about the economy, shifting market trends, and our investment strategy at First Business Bank. If you are determined to start on a DIY investing path, the one thing I’d advise, above all else, is to make sure you get your information from a wide range of sources. Sometimes, if you’re only looking at one particular source, such as watching one TV news station, you’re quite possibly going to get an uneven view of what’s going on. So, a variety of information sources is very important to proceed on your own.
Risks of DIY Estate Planning & Investing Podcast
Speaking of research and information, we offer quite a volume of complimentary resources for investors. On our website, you’ll find a podcast episode about this very same topic, “Making Sense of DIY Investing & Estate Planning,” episodes about retirement planning and charitable trusts, articles about estate planning and investing, information for business owners, our Quarterly Market Review, and periodic articles about market volatility and inflation.
