As with any area knowledge, estate planning is something that may seem very mysterious or overwhelming to some. For others, they may think they know about estate planning, but as the old quote from English essayist Alexander Pope says, "a little learning is a dangerous thing." In order to make informed decisions about your estate plan, it helps to know what is truth, what is misconception and what is myth. With that in mind, here is a group of five erroneous thoughts people have about estate planning, and why they can be dangerous.
(1) I don't have enough wealth to
justify creating an estate plan. Experts universally agree that, regardless
of the size of your estate, you should create an estate plan. Even if you have
only modest wealth, chances are that you care about the legacy you'll leave
behind and who receives your assets. If you don't create a plan, the state
makes one up for you and the distribution plan your state creates probably
won't match your wishes. Additionally, a thorough estate plan does a lot more
than just distribute your assets. It also can enhance your control regarding
who manages the affairs of your estate after you die, who would make decisions
for you if you became incapacitated and who takes over as the guardian of your
minor or special-needs children.
(2) I already have a will, so my
estate plan is set. Not necessarily. A will is an integral part of any
estate plan, but a will by itself is rarely enough. Your will allows you to
dictate directions regarding the distribution of your assets, but it does
provide you any assistance regarding who acts on your behalf if you were alive
but unable to make decisions for yourself. A complete estate plan would, in
addition to a will, also include a financial power of attorney that allows you
to designate an agent who would step in to manage your finances when you're
unable, as well as documents that would allow a person of your chooisng to make
decisions for you regarding personal, healthcare and end-of-life choices.
(3) Living trusts are only for the
very rich. Not true. While it is true that living trusts can offer certain
tax-related benefits to people with large estates, they also provide advantages
that people with any size estate can receive. Properly created and maintained,
they avoid probate. This has the potential to save your family time and money
distributing your wealth after your die. Also, probate administrations matters
are public in most states, while the process of wrapping up a living trusts is
typically carried out without the creation of any public records. So, if you're
concerned about privacy, this can be a substantial benefit.
(4) I created a plan with all of
those documents. They're signed, notarized and safely stored. I'm all finished.
Also not true. Your estate plan is similar to your car, your home or your
health. They need regular care and maintenance. A periodic analysis, or
check-up, can ensure that the plan you executed is still in optimal condition.
Maybe something in your life has changed. Maybe the law has changed. Or maybe
you just changed your mind about something. A periodic review can make sure
that your plan meets your goals as they stand today.
(5) Anyone can create an estate
plan. This is a mistake, too. You may have found a form book at a library
or an office supply store. Or maybe it was a page on the Internet. Those
documents were probably drafted by capable professionals, but they may not have
been lawyers from your state, and they definitely weren't created based upon a
personal consultation with you. The best estate plans are those whose documents
are customized based upon the unique estate planning laws of your state of
residence and the specific parameters of your desires and objectives. Also, be
careful about picking just any lawyer. You probably wouldn't want an
expert in patent law to defend you in a murder trial and you also probably
wouldn't choose a mergers-and-acquisitions attorney to handle your child
custody case. Similarly, an attorney from your home state who deals regularly
with estate planning cases can offer you advice, insight and strategies that
other lawyers might not have.
