People sometimes hear incomplete pieces of information, and they form false assumptions about various aspects of the estate planning process. In this post, we will debunk five commonly held myths so you can go forward with a better understanding of the facts.
Myth #1: You don’t have to plan your estate until you are a senior citizen.
The popular website Caring.com conducts research on an annual basis to measure the estate planning preparedness of Americans.
Overall, 32 percent of adults have wills or trusts in place, and the figure is 27.2 percent for people between 35 and 54. For the 18 to 34 age group, the preparedness number is 16.4 percent.
These are disturbing statistics, because people pass away before their time every day. The worst part of this trend is the fact that many individuals in the younger age groups are the parents of dependent children.
If you are going through life without an estate plan and you have children and/or a partner depending on you, a lack preparedness is irresponsible. You should definitely create a plan that provides for your family if the unthinkable was to take place.
There are things you can do to ensure their well-being, even if you have limited resources.
Life insurance can be the monetary solution, but you have to execute the appropriate documents in light of the fact that there are minors involved that cannot handle money. You should also name a guardian for dependent children in a simple will.
Myth #2: A will is the right choice if you are not extremely wealthy.
You have to choose between a will and some type of trust to facilitate asset transfers after you are gone. A trust can be a far better choice, and you don’t have to be a multimillionaire to reap the benefits.
It is true that there are trusts that are used by high net worth individuals that have estate tax concerns. This being stated, the revocable living trust is very effective tool that can be ideal for a wide range of people that do not consider themselves to be wealthy.
Myth #3: Your heirs receive their inheritances right away when you use a will.
A lot of people assume that the executor can distribute assets to the people that are named in a will shortly after the passing of the testator. In reality, this is far from the truth.
You will would be admitted to probate, and the court would provide supervision during the estate administration process. It will typically take about nine months at minimum to run its course, and no inheritances are distributed while the estate is being probated by the court.
This is just one of the drawbacks. Probate expenses will usually consume somewhere between three and seven percent of the value of the estate before it is distributed to the heirs. There is also loss of privacy, because probate is a public proceeding.
If you use a living trust instead of a will as the centerpiece of your estate plan, the trustee would be able to distribute assets to the beneficiaries outside of probate. As a result, these drawbacks would never enter the picture.
Myth #4: It’s simple to plan your estate using documents that you can get online.
Is DIY estate planning effective? This is a question that the people at Consumer Reports were interested in answering a number of years ago.
They created simple wills using downloads and worksheets that they obtained from three of the leading legal document websites. After the wills were completed, they passed them on to a trio of highly respected law school professors.
The educators found flaws, and they stated that unintended negative consequences can come about if the online tools are used by inexperienced laypeople.
Ultimately, Consumer Reports advised readers to steer clear of DIY planning unless the situation is very simple and straightforward.
Saving a few dollars up front can cost your family thousands of dollars to fix the mistake that bargain created. You would probably say that the purpose of your estate plan is to protect your family. Estate planning documents are generally triggered when there is a traumatic event such as if you become incapacitated or pass away. That is the time that your family wants to care for you or grieve losing you. Poorly drafted documents force them to deal with administrative details, aggravation and costs that they definitely do not want to experience. Ask yourself if knowing that your family will experience those aggravations is really the “plan” and “protection” you want to give your family.
Myth #5: The sole purpose of an estate plan is to arrange for asset transfers.
Obviously, the financial part of the equation is at the core of the estate planning process, but there is another consideration. Many people become unable to communicate sound decisions late in their lives, and you should account for this when you are developing your plan.
You can state your life support preferences in a living will, and you can add a health care proxy to name a representative to make medical decisions on your behalf.
If you have a living trust, you can name a disability trustee to act as the trustee in the event of your incapacity. To account for the management of property that is not held by a trust, you can name an agent in a durable power of attorney for property.
We Are Here to Help!
Today is the day for action if you are going through life without an estate plan. You can schedule a consultation appointment at our office in Staten Island if you call us at 332-456-0500, and you can use our contact form if you would like to send us a message.
- What Bruce Willis Can Teach Us About Incapacity Planning - June 8, 2023
- Estate Planning Tips for the Beginner - June 6, 2023
- Estate Planning Solutions for Special Needs Families - June 2, 2023
