Estate planning. It’s on everyone’s “should do” list, but it rarely seems to make it to the top of the “to do” list. Maybe that’s because estate planning is surrounded by myths and misconceptions. People think it’s only for the wealthy, or only for the elderly. The truth is, everyone needs some form of estate planning, because estate planning is life planning.
Let’s do away with five common estate planning myths:
- Estate Planning is Only for the Elderly. Physicist Niels Bohr said, “Prediction is very difficult, especially about the future.” It would be nice if we all knew what events lay ahead for us, but the truth is we’re not guaranteed long, healthy lives. People get sick, become disabled, and even die when they’re still young. That’s why it’s important to have not just a Will, but also a power of attorney and other disability documents in place now, while you’re still alive and healthy.
- Only the Wealthy Need an Estate Plan. Estate planning is not always about leaving behind a multi-million dollar dynasty. It can also be about making sure your spouse and children are provided for with life insurance and retirement plans, or that your wishes – and not the cookie cutter rules provided by your state legislature – determine who inherits your real estate and personal property when you die. Estate planning is about preserving your legacy, including both the financial and non-financial components of that legacy.
- You Only Need a Will. A Will is an excellent start. It allows you to choose an executor to oversee the distribution of your estate. It lets you express your wishes for how and when your assets are to be divided after your death. It also lets you nominate a guardian to care for your minor children should the need arise.
However, there are certain estate planning goals a Will cannot accomplish. For example, it can’t keep all your assets out of probate, nor does it control what happens to life insurance policies, retirement accounts, or other property with designated beneficiaries. Further, because a Will does not take effect until your death, it cannot be used to plan for disability during your lifetime.
This is why you need a complete estate plan tailored to accomplish your specific goals.
- It Doesn’t Matter Which Fiduciary You Name. Part of making an estate plan is choosing other people, such as an executor, a trustee, or a guardian, to make decisions for you. These people are known as fiduciaries, and it is easy to name someone to serve as a fiduciary without giving much thought to the person’s qualifications. This can be a huge mistake. Picking an unqualified or unwilling fiduciary can lead to mismanagement of assets, conflict among your heirs, and unnecessary litigation. On the other hand, taking the time to choose qualified fiduciaries can help your estate plan work smoothly and efficiently.
- Estate Planning is a One-Time Event. Putting an estate plan in place is an excellent first step. However, life means change. Babies are born or adopted, loved ones get married or divorced, or they die. You might experience substantial increases or decreases in wealth or significant health challenges. Each of these events can affect your estate plan, as can changes in state or federal law. Regularly reviewing your estate plan can help to ensure that it stays up to date and in step with your current circumstances and wishes.
Isn’t it time to move estate planning from your “should do” list to your “to do” list? A qualified estate planning attorney can work with you to establish a plan that meets your goals and wishes today, and can adjust that plan as your goals and wishes evolve in the future.
By: The American Academy of Estate Planning Attorneys