MYTH # 1: Estate planning is just for the wealthy.
An estate is comprised of everything you own: your car, home, other real estate, checking and savings accounts, investments, life insurance, furniture, personal possessions, etc. No matter how large or how modest, everyone has an estate and everyone has certain responsibilities and hopes that do not end with death or incapacity. Moreover, mortality does not discriminate and dictates that we all must consider not only our assets, but our personal business affairs, custody of children, and healthcare decisions. Estate planning is the process of recognizing these issues and strategically employing tools that mitigate the risks, including making sure that your finances are properly taken care of if you become incapacitated, that decisions about your healthcare are carried out the way you’d like if you’re not able to communicate your wishes due to incapacity, and that your children and other loved ones are taken care of when that time eventually comes. Estate planning is for anyone who may become seriously ill or pass away. In other words, it’s for everyone.
MYTH # 2: I’m too young for estate planning.
You never know when we might need estate planning and, if you delay, it may be too late. In fact, young and middle-aged parents with young children have one of the most important reasons of all for proper estate planning: providing for their children should something happen. This includes financial concerns as well as deciding who will take care of the day-to-day needs of their children and what level of direct control to give children over their financial assets. Without a plan you leave all those important decisions to default rules that may not meet your needs (e.g., unfettered access to assets at the time a child reaches 18 years of age).
MYTH # 3: I have a Will so my family will not go through the probate process.
If you die with assets that are solely in your name or co-owned with others but not in joint tenancy, the Will must be filed with the court and your family will go through the process called “probate”. Because the estate will be probated even if there is a Will, many people and families prefer a revocable living trust-based estate plan over a simple Will.
MYTH # 4: I’m not wealthy enough to set up a trust.
Certain assets must go through the probate process to transfer title, whether you have a Will or not. However, if a trust is created and funded properly with the assets, there is no need for probate, (including multiple probates if you own property in other states). A trust can also prevent court control of assets in the event of incapacity, bring all of your assets (even those with beneficiary designations) together into one plan, provide maximum privacy, simplify the transfer of assets at death, and can be easily changed at any time. A trust can also protect your family and future generations from liabilities. Unlike a Will, which will result in the transfer of assets immediately upon completion of probate, assets can stay in your trust for many years after your death if that is your desire. Assets in a trust are managed by the trustee you select according to your directions (e.g., until your beneficiaries reach the age you designate or some other conditions you set are satisfied, the beneficiaries will not have direct control of the assets you have left for them). Your trust can remain in existence for as long as necessary to provide for a loved one with special needs or to protect the assets from beneficiaries’ creditors, spouses, and irresponsible spending. In addition, since assets in your trust are not subject to probate, the fees, delays, court costs, and other undesirable aspects of probate are avoided.
MYTH # 5: A revocable trust avoids creditors.
A revocable living trust is an excellent tool that provides many great benefits, but it is not a tool that may be utilized to hide assets, avoid creditors, or avoid lawsuits. Irrevocable trusts may offer additional protections in this regard, but funding an irrevocable trust transfers permanent control of the assets to someone else.
MYTH # 6: A durable power of attorney gives an authorized person authority to take control of and administer a decedent’s estate.
A durable power of attorney is an excellent tool that allows another person (or multiple people) to legally conduct certain business for another. The terms of this tool can be modified to allow the authorized person (or multiple people) to act either immediately or upon the maker’s incapacity. However, the power of attorney ends with the maker’s death and all powers granted in the power of attorney expire. Control over the estate and accounts will transfer to the person (or people) appointed by the court in the probate process or the trustee if the maker created a trust.