Estate Planning Myths
ESTATE PLANNING MYTHS
One sad truth about estate planning is that a lot of people are still unsure of what it calls for and blindly allow common estate planning myths to influence their decisions.
As an experienced trust and estate lawyer, you must understand that if you fall victim to these untruths, you will leave your family mixed up once you are gone.
Let’s face it, estate planning is not a subject that many people want to think about or talk about. I get it, that was me, too.
However, it’s important to realize that a properly crafted estate plan allows you, while you are still living, to ensure that your property will go to the people you want, in the way and when you want.
This article serves as an opportunity to correct some of those tough to kill ideas offered when estate planning is discussed. So, let’s look at the most common estate planning myths and set the record straight.
Estate Planning Myth #1: Estate planning is only for the rich
This is the most common estate planning myth we hear about. People believe that estate planning is something that will only benefit those who are rich - this is untrue!
An estate plan is something that everyone needs to tackle regardless of the size of your total wealth, as you'll want to make sure everything is passed on as you wish.
It’s about ensuring your health care directives are followed if you become incapacitated at a point in your life as well as your finances are taken care of too. It’s also about planning for loved ones that depend on you financially or for care once you’re gone.
So, if you own property and assets of any size and have a spouse or other dependents, estate planning is for you.
If you have loved ones who would be affected by your passing, estate planning is for you.
The most important part of estate planning has nothing to do with money really, it’s about appointing who would care for your child or children should something happen to both parents that are essentially needed to be considered.
It will protect their interests and their future financial needs. It will also help them have an easier transition when you pass away.
Estate Planning Myth #2: I’m too young to have an estate plan
This is untrue! Estate planning is important at all stages of life because no one is too young or too old for planning.
No one likes to think or talk about death, but it is important to be prepared at any age since life can change in a blink of an eye.
Just because you’re young doesn’t mean bad things can’t happen to you. So don’t wait until you are older to create an estate plan. It’s encouraged to work on it as early as possible.
Illness and accidents can happen to anyone at any time, that's why it’s important to complete planning while you are healthy and hold the requisite mental capacity to do so.
The right time is now. Putting a plan in action as soon as possible is the best gift you can give for yourself and your loved ones as the fruit of the labor you spent a lifetime on earning, acquiring, and saving.
Estate Planning Myth #3: I have a will, I don’t have to worry about probate
Generally speaking, having a will is better than having no plan at all. However, this is one of the common myths about estate planning because a will does not avoid probate.
While having a will is an excellent way to make sure that your wishes following your death are followed, it has limitations that you may not have considered, such as not avoiding the probate process (and possible associated costs) and your heirs potentially paying taxes.
This is the only way for a court to decide if your will is legally valid and ensure that the decisions you made in your will are enforced.
What is probate?
Probate is the court-supervised process of authenticating a will, locating, and determining the value of the decedent’s assets, paying any final bills or liabilities, and distributing the remainder of the estate to the rightful beneficiaries.
Certain assets may not be covered by your will; these include life insurance policies, your superannuation, and any property or accounts that you jointly own.
What is a will?
A will is public information and could be contested in court, leading to more time and cost. It is a legally-binding statement directing who will receive your property at your death.
It also appoints a legal representative to carry out your wishes. However, they will cover only probate property.
If a properly drafted trust is established, and the assets are in the trust, they can avoid the public process of probate and the potential costs and delays involved.
So it is best to make sure to have a thorough discussion with your attorney about what kind of protection and other measures you may need to make sure your estate will be properly managed, especially if you don’t have a legal background.
Estate Planning Myth #4: My spouse will get my assets if I pass away anyway
This is a total myth! There are a lot of things that can change that.
These situations come up frequently, and without an estate plan, can leave your finances in disarray. And for tax purposes, that is the worst way for your spouse to get your assets.
If you die without trust your estate goes to probate and your spouse does not automatically get everything.
First, depending on the size of your estate, court costs and legal fees can eat up almost half of your entire estate.Then, all your creditors get a chunk.
Don’t think you have creditors? Better think again. Anyone you’ve ever owed money can try to make a claim, valid or not.
And then there are the new creditors, such as medical bills, accident victims if you die in a car crash, etc. And finally, there are the claims of the children from both your current marriage and also any prior marriages and your siblings.
Your spouse will probably get the largest share, but he/she will not get it all, not even close. And of course, the process can take almost a year. Even if your spouse gets everything, who gets it when your spouse dies?
There’s a lot to consider when you think about it. This can all be avoided with a trust-based estate plan.
Estate Planning Myth #5: My estate plan will automatically update once created
This isn't the reality.
Remember that estate planning is not a “set it and forget it” deal. Your life will change dramatically over the years.
Unfortunately, simply updating your will after a life event, such as having children or grandchildren, remarrying, divorced, retirement, or purchasing more property.
All of these changes need to be reflected in your estate planning because it doesn't trigger automatic updates to all of your other legal documents.
While this attitude may seem reasonable, unfortunately, as the years go by your life and the laws governing wills, estates, probate, trusts, and death taxes will continue to change too, which means that eventually, your estate plan will become out of date.
Estate Planning Myth #6: I don’t need a lawyer, doing estate planning on my own is easier and cheaper
Believe me, estate planning is not a do-it-yourself project.
Possibly, at first glance, the important documents needed for a good estate plan are relatively simple to draw up, and it is tempting to try to save money by using a do-it-yourself online will service or just writing something up yourself.
You might save money upfront compared with using a professional service, but if you get anything wrong you could end up costing your loved ones time and money when it comes to sorting out your affairs after you’ve died.
Even worse, if you draft the will poorly, it could even mean that your will is invalid and then the law decides who your money and property should go to.
Estate planning involves a lot of moving parts and scenarios to consider. Doing this all on your own can be overwhelming and lead to missing key aspects. Knowing how to make a will, a living will, or a trust is much more different than creating the document itself.
That’s why it’s still a good idea to at least run these documents by a qualified estate planning lawyer and financial advisor, as these experts understand the ins and outs involved in taxes, trusts, and wills.
Estate Planning Final Words
Estate planning is for those that are single, married, with children, without children, young and elderly, in other words, estate planning is for everyone!
These are only six of the top estate planning myths mentioned above. Unfortunately, there are many more.
The only way to separate the myths from reality and get a plan that will work for you and your family is to retain the services of an experienced estate planning attorney.
If you’re like most people, thinking about death probably seems pleasant to discuss, but being a responsible person or family member requires us to do tasks that we might not want to do, and estate planning is one of them.
Take the first step in the right direction in ensuring that your wishes are in order after you pass away, and you can be confident that you’ve taken steps to protect yourself and your family.
Ignore these estate planning myths. Talk to an attorney today!
Don't let myths scare you into not executing an estate plan today. If you wait too long, it might be too late.
Do you have other questions about estate planning?
Andrea Aston is here to help you with all estate planning questions and will offer options that are best for you, so that you can feel confident that you are working with the right person.
If you’re ready to take the first step towards creating your plan, or if you already have an estate plan that needs updating, call for a free phone consultation to learn about how we can help with your estate planning needs.
Tags: Estate Planning Myths, estate planning