Many people have mistaken ideas about estate planning. The uncomfortable thoughts of incapacity or death accompanied by inaccurate information that is shared have caused many to accept common myths.
Myth #1: Only the Rich Need an Estate Plan
We often hear in the news about a celebrity who passed away, leaving no estate plan, a plan with errors, or family members angry about the plan. It’s easy to think that only the wealthy need to be concerned about their estate because their estate is so large, they have lots of assets to be concerned about, and they can afford to do planning. By comparison, when the average person thinks about their own planning needs, they assume that their possessions are not worth enough to require an actual estate plan.
However, estate planning is about more than just your money and assets. While proper planning allows you to determine who receives your assets upon your death, the planning process also addresses what happens if you become incapacitated and unable to manage your own affairs and someone must make decisions on your behalf—a far more likely scenario. If you do not have an estate plan, the probate court will have to appoint someone to make your medical and financial decisions for you. The process can be very time-consuming, expensive, and public, and can wreak havoc on a family if they disagree about who should be appointed and how decisions should be made.
Even if you feel you have few assets, you should consider who gets your hard-earned savings when you die. If you have no plan, state law will decide who gets what, and many times, the government’s best guess as to what you would have wanted is not what you would have done yourself. If you don’t do your own planning though, the state must step in.
Myth #2: I Don’t Have to Plan Because My Spouse Will Get Everything
It is common for married couples to own their assets jointly. With this approach, when one spouse dies, the surviving spouse automatically becomes the sole owner. In many cases, married individuals prefer this outcome.
However, this approach can be risky. While it is convenient for money and property to pass automatically to a surviving spouse, outright distribution offers no protection. If the surviving spouse had a car accident or got sued, those assets that were previously owned jointly are now available to creditors to satisfy any judgment against the surviving spouse.
In addition, if the surviving spouse remarries, the assets now in the name of the surviving spouse are not protected from the influence or risks of the new spouse. The new spouse can now influence the surviving spouse to spend assets that may have been intended to go to children and grandchildren if not needed by the surviving spouse. Those assets are now also subject to the risks faced by the new spouse, such as claims against them from accidents or need for long-term care. With blended families being common today, this scenario is a real concern for many people.
Estate planning does not mean that you must disinherit your spouse. Rather, it means the two of you can sit down and proactively plan what happens to your joint property and accounts when either of you dies, ensuring that the survivor is provided for and that any remaining money and property are gifted in a way that is agreeable to both of you.
Myth #3: A Will Avoids Probate
Many people mistakenly believe that a will is a method for avoiding probate. Unfortunately, they are wrong.
While a will is an effective way to designate a person to wind up your affairs after you have passed, determine who will get your hard-earned savings and property, and, if necessary, appoint a guardian to care for your minor children, a will requires the involvement of the probate court. The process begins with the court determining whether the will is valid under state law and the involvement of the court can then vary, depending on the circumstances. The entire process becomes a matter of public record, disclosing information and details that can be kept private with other methods of planning. The court may direct and supervise all aspects of the process or only portions, but the involvement of the court creates expenses and delays that are most often unnecessary and undesired.
We are here to answer any questions you may have about estate planning, the estate planning process, or probate. Together, we can craft a one-of-a-kind plan to ensure that you and your family are properly protected. Call us today.