There are a lot of myths and misconceptions in Estate Planning! Whether at seminars in person, through webinars, or over the phone, we often hear these estate planning myths come up quite frequently:
MYTH #1: "Estate planning is only for the rich."
When people hear the word "estate", the automatic association is that of a millionaire, for example, "stately Wayne Manor". This is a popular misconception. Often, people believe that estate planning only benefits the wealthy, but nothing could be further from the truth.
If you own property and assets or have loved ones that depend on you to provide for their income or care, you have an estate and need a plan—regardless of the size of your estate!
Estate planning is something everyone needs to engage in regardless of age, estate size, or marital status. If you have a bank account, investments, a car, home or other property—you have an estate. More importantly, if you have a spouse, minor children, or other dependents, an estate plan is crucial for protecting their interests and their future income needs.
An estate plan can help you accomplish these and other important goals:
MYTH #2: Estate planning is only about distributing my assets after I’m gone.
Everyone knows that they need a will. But what happens when someone is in a serious accident, is in a coma, or is suffering from dementia or a stroke? Legacy and incapacity planning are two areas of planning that encompass far more than simply managing your assets during or after your lifetime.
Just like your goals, your legacy is unique to you and your family. While it includes important charitable planning goals and gifting strategies, it goes well beyond the monetary aspects to include passing down the values, experiences, hard work and memories that define your life and are important to you and your family in a way that’s meaningful to you.
Incapacity planning helps you prepare for unexpected events at every stage of your life from naming a guardian for your minor children, to who will manage your affairs if you’re no longer able to do so yourself, to the type of care you will you receive and who will oversee your care.
MYTH #3: A will can oversee the distribution of all of my assets.
A will is a legal document that instructs how your property will be distributed after your death. It allows you to name an executor, who is your personal representative charged with overseeing the distribution of your property and shepherding it through the probate process. Probate is the process that’s required to validate your will and transfer your assets.
However, certain assets may sit outside of your will. These include life insurance policies or qualified retirement accounts (401(k)s, IRAs, etc.) that have a beneficiary designation, as well as assets or accounts with a pay-on-death (POD) or a transfer-on-death (TOD) designation. These assets transfer directly to the named beneficiaries and are not subject to probate. This is why it’s so important to review your account beneficiary designations annually or whenever changes in your life occur. For example, if you divorce and remarry and fail to update the beneficiary designation on your IRA account to your new spouse, your ex-spouse would receive those assets upon your death. Even if your will and/or trust names your current spouse as the beneficiary or co-trustee, since these assets sit outside of your will or a trust, they are not governed by those documents.
In addition to a will, it’s important to work with the right estate attorney to draw up other important legal documents to protect your interests and the interest of your dependents and/or heirs. These include:
MYTH #4: Once I put a plan in place, I am finished! I don’t need to revisit it later.
Planning is never a “once and done” proposition. Your life, preferences and goals change over time, and may be also be impacted by outside influences, such as the financial markets, tax law changes and economic events. What if you marry or divorce, welcome a new child or grandchild, your minor children become adults, you move to another state, or experience the death of a spouse? All of these changes need to be reflected in your estate planning. That’s why it’s important to periodically review and update your estate planning documents, including your beneficiary designations and how your various accounts are titled!