People often fall for certain estate planning myths, and far too often, their family members wind up paying a hefty price. Let’s look at some of these myths so that you can steer clear of mistakes that yield negative consequences.
1.) You can plan your own estate.
There are websites on the Internet that sell boilerplate legal documents. Their offerings extend to the realm of estate planning. The idea is that you download a generic template off the Internet, you fill in the blanks to create a last will, and you are good to go.
You may want to take pause before you buy into this philosophy. A few years ago, researchers at Consumer Reports created wills using downloads and worksheets that they obtained from three of the leading legal document purveyors. Three college legal professors examined the documents. They found flaws that could lead to unintended negative consequences, and Consumer Reports advised against DIY estate planning.
This is one thing to take into consideration, but there are other reasons why you probably don’t want to go it alone.
2.) The state will take care of everything if I die without an estate plan.
If you die without any type of estate planning documents, you would die intestate. Under these circumstances, the state would in fact step in to sort things out. After final debts were paid, the assets would be distributed under intestate succession laws.
Under these circumstances, it is possible if not likely that people that you love would be disinherited or shortchanged. There is no reason to put your legacy in the hands of the state.
3.) If I have a will, my family will receive their inheritances right after I die.
You may have seen a scene in a movie or on a television show: Someone passes away, and after the funeral, mourners gather at someone’s home. The executor of the estate motions certain people into a study so that they can be present for the “reading of the will.” After this reading, the executor can start writing checks to the inheritors.
In real life, things do not work that way. There is no reading of the will. Under state laws, the executor would be required to admit the will to probate. This is a legal proceeding.
During probate, final debts are paid, including taxes. If anyone wanted to challenge the validity of the will, an argument could be presented before the court.
The executor or personal representative would identify and inventory the assets that comprise the estate. Ultimately, the assets would be prepared for distribution, so appraisals and liquidation would be necessary.
All of this takes a lot of time, and the inheritors do not receive their inheritances while the estate is being probated by the court. If the case is relatively simple and straightforward, the process will typically take close to a year at minimum.
4.) Trusts are only used by the wealthy.
There are certain types of trusts that are used by high net worth families who are concerned about the estate tax. The federal estate tax is potentially applicable on asset transfers that exceed $5.45 million.
However, there are other types of trusts, and you do not have to be wealthy to realize the benefits. One trust that can be ideal for a wide range of people is the revocable living trust.
When you have a revocable living trust, you maintain control, because you can act as the trustee and the beneficiary while you are alive and well. You leave instructions in the trust agreement, and you name a successor trustee and successor beneficiaries to assume these roles after you are gone.
After your passing, the successor trustee would follow your instructions. You could instruct the trustee to distribute limited assets over an extended period of time to prolong the viability of the trust. These distributions can generally take place in a timely manner, because they would not be subject to the probate process.
Schedule a Consultation
In this blog post, we have looked at a handful of the estate planning misconceptions that people sometimes harbor, but there are many others.
If you would like to provide for your loved ones in the ideal manner given your unique personal circumstances, our firm would be glad to help you devise a personalized plan. You should be fully aware of all of the facts, and you should understand all of your options thoroughly.
We are available to you if you would like to schedule a consultation. To set up an appointment, give us a call at 239-225-7911 or send us a message through our contact page.
