There are five common myths which frustrate all estate planners. They’re just wrong and hurt people every day of the week. Every family needs to do estate planning and trusts. That is a fact, and we are continually amazed that misinformation continues to circulate.
1. Estate Planning is only for rich people.
This is probably the single most common estate planning myth there is. Everyone needs to do estate plans. Estate plans protect you, your kids, your spouse, your assets, and your peace of mind.
Protects your kids by making sure no matter what happens, they will be taken care of by the people you choose and by the money you provide. Without an estate plan, people can take your money and leave your kids in foster care. I have seen this happen more than once.
Your spouse is protected from predators and creditors. A predator is your spouse’s new companion, who is after your money. Creditors come along after you are gone like vultures.
An estate plan protects your assets when you’re alive and when you’re dead. A trust will ensure that your assets are invested properly, and distributions are made to your loved ones exactly the way you want.
Peace of mind comes with knowing if the worst happens, even if you are very ill, you still have control over what you worked a lifetime to build.
2. “I have plenty of time.” AKA: Only those ready to die need estate plans.
Tomorrow is the time when everyone believes things will happen. Reality is that disability and death come unexpectedly. Just because you’re young and healthy today, doesn’t mean bad things can’t happen to you.
Do you have children you need to protect? Are you providing financial security for a parent or sibling? Are you in a committed relationship, but don’t want to get married? Are you newly married? Life happens every day and you need to be prepared.
Unexpected tragedies aside, an estate plan is useful even when you’re young since an estate plan is not just about death.
A good estate plan will include not only a will, but also:
- A healthcare directive and HIPAA Authorization: Useful if you find yourself facing a surprise stay in the hospital
- Power of Attorney documents: If you ever travel outside the country or are otherwise unable to sign for yourself on financial or legal documents
- Legal documents relating to minor children, such as medical authorizations: An essential document if you leave your minor child with a babysitter for any extended period of time
3. Married people don’t need estate plans.
Are you kidding me! We love our spouse more than anyone else in the world. We must protect those we love. Estate planning and trusts are essential when you are married.
While you’re both alive, the healthcare documents will give your spouse permission to do what needs to be done. They will also make certain your income and investment strategies are continued.
After you die, they take care of your spouse. The trust will make certain that bank accounts are not frozen upon your death. There will be no extra taxes on your death. Death is traumatic enough.
But what happens when your surviving spouse gets re-married? Do you want the new spouse or your children to have an inheritance? That is not a trick question. It is the most common question I am asked about with families who lose their inheritance. Why did this happen? Estate planning makes certain your children receive their inheritance.
And what if both you and your spouse die together? Trust me, it happens. In a second marriage without the right planning one side takes all.
4. All I need is a quick will and I’m done.
A quick will does it to you. Much is lost when you rush. Problems never get solved because they are never discussed. Extra taxes happen. And the wrong people get your inheritance.
If you want to be technical, you don’t even need a quick will; after all, your state of residence has a plan already in place for you. The problem is that it probably isn’t the plan you want. You are not an estate planner, and neither is your state legislature.
5. Estate Planning is only about money.
What you have is not as important as what needs to happen to protect you and your loved ones. I won’t lie to you. Sometimes estate planning is about money, but money is usually the last thing we talk about.
Estate planning is about people. It’s about your family and doing what’s right for them. Estate planning is not just about saving your family from estate taxes, or making sure Junior gets the house; it’s about leaving them peace of mind.
Estate planning and trusts are about sitting down with your estate planning attorney to talk about taking care of yourself and your loved ones. You need to protect what’s most important to you and this is how you do it. The right estate planning attorney for your family looks at life today because bad things happen today. If you only plan for 20 years from now, you will make tragic mistakes because no one knows what the future will bring.
Are you meeting with the right estate planning attorney?