Misconceptions About Estate Planning -What You Thought You Knew but Really Didn’t
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Misconceptions about Estate Planning -What to avoid?
Common estate planning misconceptions come when people know the concept but aren’t very clear on the specifics involved. These myths can result in people to believing that an estate plan is unnecessary. By debunking common estate planning myths, individuals can then embrace the need to protect their vulnerable assets, plan for the transfer of wealth to their beneficiaries, and craft a plan for generational success. Let’s take a look:
1. Wills avoid Probate- FALSE
Wills don’t avoid probate; in fact, they all but guarantee it. A will provides the court with guidance on your wishes, it doesn’t avoid the probate process – only a trust can do that.
2. There will be a reading of the will – FALSE
A reading of the will is one of those classic movie moments but, while dramatic and compelling, this typically never happens today. Wills were read before photocopies were invented, in times when many people were illiterate.
3. My will controls all my assets – FALSE
A will normally controls the assets in your name upon your death but there are certain assets that are not subject to the terms of your will. The most common type is jointly owned property. Additionally, certain assets (life insurance policies and retirement accounts) usually pass by a beneficiary designation and will pass directly to the named beneficiary (whether an individual or a trust) instead of having to be subject to review by the court.
4. If I die without a will, everything goes to the state – FALSE
If you pass without a will, each state applies what are known as “laws of intestacy” to determine who will inherit what and how your property will pass upon your death. The only way a government will inherit your estate is if you die intestate (without a will) and have no identifiable surviving heirs or creditors.
5. I don’t need a will – my spouse has Power of Attorney over all of my accounts – FALSE
A power of attorney is a legal document that lets someone you trust stand in for you when it comes to certain legal, financial, or medical matters while you are still alive. Unfortunately, a power of attorney ceases to be effective upon death. That is where a will or trust takes over.
6. I downloaded a will – that’s good enough – FALSE
For a will to be recognized as a legal document it must be witnessed by two or three people – depending on the state laws.
7. I will never go into a nursing home – FALSE
Studies show that 69% of adults age 65+ will likely need in-home, assisted living or nursing home care. Early planning is critical based on the rules imposed by Medicaid, and the need to get long term care insurance before you receive a critical diagnosis. Failure to plan for this type of care can destroy even the best laid retirement plan.
8. I can do a DocuSign, right?- FALSE
Most jurisdictions will not accept electronic signatures on customary estate planning documents like trusts, wills, and codicils.
9. Marriages are for life – FALSE
Failure to consider the effects of divorce in estate planning can result in a former spouse being the beneficiary of certain assets upon your death, if not updated after the divorce is final.
10. Trusts are only for rich people – FALSE There are numerous benefits for choosing a trust (revocable or irrevocable) over a will. Trusts are much easier and faster to administer than wills. Trusts avoid probate altogether, and may provide tax savings and other advantages in the long run.