One reason estate planning is such a difficult process is because most of us don’t want to think we won’t live forever. And sometimes we buy into an assortment of estate planning myths. Here are just a few:
Estate Planning Myth #1: Only the Rich Need an Estate Plan
Often on the news when we hear about estate planning, it relates to a celerity or a wealthy businessperson. We think, of course rich people need an estate plan, and they can afford to have one prepared. By comparison, when the average person thinks about their own planning needs, they assume that their possessions are not worth enough to necessitate investing in an estate plan. Such thinking is far from the truth.
Estate planning is about more than just money. While proper planning allows you to determine who gets your assets, a properly drafted plan defines what happens if you become incapacitated (unable to manage your own affairs). If something happens to you and you have no plan n place, the court steps in and make decisions for you. Is that really what you want? Not only can the process be time consuming, but someone you don’t even like can be appointed to manage our life and your affairs.
Even if your means are modest, you should consider who gets your hard-earned savings when you die.
Estate Planning Myth #2: I Don’t Have to Plan Because My Spouse Will Get Everything
It’s common for married couples to jointly own assets. Depending on the state law, if a couple owns assets jointly or as tenants by the entirety, when one spouse dies, the surviving spouse automatically becomes the sole owner. Often this is what coupes want.
However, sometimes this approach can be hazardous. While it is convenient for assets to pass directly to the surviving spouse, an outright distribution provides no protection. For example, what happens if, after your spouse dies, you have a car accident and get sued? If the jointly owned money and property automatically become solely yours, they are available to creditors to satisfy any judgment against you.
Another thought: what if, after you die, your spouse remarries? If the brokerage account you owned jointly becomes solely your spouse’s, he or she can spend it all in any way they desire, without regard to your wishes or the next generation. If the surviving spouse remarries, their spouse can use up your hard-earned assets. In some cases, they ca spend money you had intended for your children. With blended families being common today, this scenario is a real concern for many people.
Estate planning does not mean that you have to disinherit your spouse. Rather, it means the two of you can sit down and proactively plan what happens to your joint assets.
Estate Planning #3: A Will Avoids Probate
Many folks operate under the false belief that if you have a will you can avoid probate. This is not true. In fact, the opposite is true. Unlike a trust, a will is required to go through probate.
Yes, a will is an effective way to designate who will administer your estate when you die, and, if necessary, who will care for your minor children. That said, a will must be submitted to the probate court to begin the process of distributing your money and property.