After 15 years working with clients in estate planning, I’ve realized that many people view estate planning as overwhelming or confusing. And this is pretty understandable: it’s not exactly a common topic at birthday parties. (I mean, it wouldn’t be too nice to remind grandpa he’s ‘getting up there’ after he blows out the 78 candles melting off his cake.) More likely, we’ve heard about the aftermath of someone going to court because grandma June left a will, or maybe we’ve seen TV shows with siblings fighting to get a better inheritance. While the media might show the aftermath of someone inheriting great-grandpa’s oil money, it often ignores the planning that allowed these assets to be distributed in the first place. So, let’s backtrack some to answer what estate planning is actually like.
As a quick background, the term estate isn’t only used for rolling-hills mansions or shares in a Wyoming diamond mine; an estate is everything you own. This includes any houses, bank accounts, insurance policies, Beanie Baby collections, and more. It can also include intangible (non-physical) assets like trade secrets, cryptocurrency, or even client relationships.
To answer this, first we’ll address What does an “estate plan” involve?
Better yet, what even makes something an “estate”? To address these topics, we’ll first define an estate, discuss who needs an estate plan, and uncover some of the common misunderstandings around the topic.
but what does an “estate plan” involve? , what even makes something an “estate”?
Estate planning is a key part of financial preparedness; this process involves organizing your assets and preparing for their distribution in the future. Along with managing your assets, here you can also name people to make financial and healthcare decisions for situations when you are unable.
There are many misconceptions about estate planning which prevent people from taking the necessary steps to prepare for their future. In this blog, we’ll disprove these common myths and highlight the benefits of having an estate plan.
Myth 1: Estate Planning is for the Wealthy
One common myth is that this process is only for wealthy people. This myth has led many to believe that they do not even own enough assets to worry about. While this belief causes many people not to plan for their future, individuals of all income levels benefit from having a plan for after they’ve passed. Questions to consider asking yourself: What do I want to happen with my belongings after I die? If I die young, who will take care of my children? If there’s an accident and I become incapacitated, who will make important healthcare decisions on my behalf? All of these are factors to consider when creating your estate plan.
Why Estate Planning is not just for the Wealthy
- Estate planning benefits individuals of all income levels, not just the wealthy.
- This process empowers you to select guardians for dependents, outline health care preferences, reduce tax obligations and costs, and protect your legacy.
- When creating an estate plan, you can make sure that your wishes are respected.
- Having an estate plan gives you the satisfaction of knowing that your family will be cared for and your values will be preserved.
- Estate planning creates a smooth distribution process, which can prevent family disagreements.
Myth 2: Estate Planning is only for Older Individuals
Another common misconception is that estate planning is something to get around to in your 60s or 70s. But, this belief can have serious consequences for your life and your future. The truth is that estate planning is important in all stages of your life; it is a way to prepare for unexpected events and make sure that your wishes are carried out, regardless of your age or financial situation. While we introduce estate planning as an important step of financial planning, you can also consider estate planning as a process in which you prepare for the unexpected. Unfortunately, accidents and unexpected illnesses can occur in life, creating the need for a plan. You can consider estate planning as an important step to take before a person dies, with the knowledge that you cannot know for certainty when that day will come.
Why Estate Planning Matters at a Younger Age
Starting the estate planning process early offers several benefits:
- Choosing Guardians and Conservators for Minor Children: If you have young children, it’s reassuring to know there are other people you trust set to care for them. Without an estate plan, the court will decide who becomes their guardian. Additionally, children under 18 cannot inherit property in their own name. So, if you die without a will or estate plan, the court will designate someone over the estate to manage any property for their benefit.
- Indicating Healthcare Preferences: In case you are unable to make medical decisions for yourself, an estate plan will allow you to express your healthcare preferences and choose a healthcare representative to advocate for you.
- Designating Beneficiaries: By clearly stating who should inherit your assets, you can avoid potential conflicts among family members and make sure that your loved ones are taken care of.
Myth 3: A Will is Sufficient for Estate Planning
We often hear that having a will is enough when it comes to estate planning. While a will is an important planning document, it’s just one piece of the puzzle.
The Limitations of Relying Solely on a Will
A will primarily focuses on the distribution of your assets after death, but there are some limitations to keep in mind:
- Probate Process: The probate process can be time-consuming, expensive, and subject to public scrutiny. Assets passing through a will may be tied up in probate court before reaching beneficiaries.
- Incapacity Planning: A will does not address the possibility of becoming incapacitated and needing someone to manage your financial affairs or make healthcare decisions on your behalf.
- Asset Protection: If you have concerns about protecting your assets from creditors, lawsuits, or long-term care costs, a will alone may not provide adequate safeguards.
- Limited Privacy: Unlike other estate planning tools, a will is a public document once it goes through probate, which means anyone can access its contents.
The Components of a Comprehensive Estate Plan
A well-rounded estate plan includes multiple documents to match your specific circumstances:
- Pour-Over Will: This document works in partnership with a living trust. It is designed to automatically transfer any unallocated assets into the trust, acting as a fail safe.
- Trusts: Trusts offer greater flexibility and control over your assets. They can help minimize estate taxes, avoid probate, protect assets for future generations, and provide for family members with disabilities.
- Powers of Attorney: These legal documents allow someone to handle your finances or make decisions on your behalf if you become incapacitated.
- Advance Healthcare Directives: Also known as living wills, and often including a medical power of attorney, these directives allow you to express your medical treatment preferences and appoint a healthcare agent.
- Beneficiary Designations: Certain assets such as life insurance policies, retirement accounts, and payable-on-death bank accounts pass directly to beneficiaries outside of probate based on beneficiary designations.
Myth 4: DIY Estate Planning is Easier
Many people believe they can save money and simplify the process by using online templates. Yet, this approach comes with significant risks. Estate planning is a complicated and personal matter, influenced by different factors such as family dynamics and legal difficultiies. Online templates are convenient, but they can lack customization and do not address individual needs. For example, online templates cannot account for future incapacity, decisions to disinherit a family member, or unequal distributions to children.
Without an estate planning attorney, there’s a chance your decisions now could negatively impact your estate and loved ones later. I understand the appeal of DIY solutions but stress the importance of seeking expert advice. After years of working with individuals creating estate plans, I’ve become familiar with the common (and uncommon) challenges they face while planning for the future. I will make sure that your plan fully aligns with your unique goals. Whether you decide to utilize an online template or directly meet with an attorney, I recommend that the finished product get looked over by an attorney.
Myth 5: Estate planning is only for individuals who have Children
“But I don’t even have kids”.
Another false belief is that estate planning is only necessary for people with children. This view ignores that estate planning allows all people to have control over where their money and assets go.
Having children does often motivate individuals to prioritize estate planning, but its significance goes beyond just parenthood. Even if you don’t have kids, you still have assets, preferences, and family members to consider when making plans for the future.
Estate planning allows individuals without children to:
- Designate beneficiaries
- Specify how their assets should be distributed
- Outline healthcare directives based on their wishes
These benefits apply regardless of parental status. Whether it involves establishing trusts for charitable purposes, selecting beneficiaries among extended family members, or appointing healthcare decision-makers through powers of attorney, hiring an attorney will make sure that every aspect of your estate is carefully considered.
Estate planning is not limited to those with children—it’s a tool for anyone looking to safeguard their assets, express their desires, and preserve their legacy.
Myth 6: Estate Planning is a One-Time Process
Another popular myth suggests that estate planning is only a one-time process; in reality, it is an ongoing effort that requires regular review and updates. Estate plans should be modified alongside changes in your life circumstances. . Obtaining new assets requires changes to your plan. Changes to your family, such as marriage, divorce, the birth of children or the death of a loved one, are factors to consider when updating your estate plan. For example, you might find that a previous close family member listed in your estate plan is now someone you have little contact with. Or, you might wish to designate an adult child to be a trustee rather than burdening an elderly parent.
As you notice major life changes, set aside time to check your current estate plan. You may find out that your preferences have changed over the years. By meeting with an attorney to update your plan, you can make sure that it remains aligned with your current wishes and financial situation.
Here are the concluding key takeaways from debunking these myths:
- Estate planning is important for everyone, regardless of age or having children.
- An estate plan secures your assets and ensures they go to your trusted people.
- Seek an attorney to help you prepare for different scenarios and circumstances.
We encourage all readers to seek a professional for your estate planning needs. Attorneys can help make sure that your wishes are accurately documented and legally protected, providing peace of mind for you and your family.
It’s important to prioritize your future by participating in thorough estate planning. Even if procrastination may sound tempting, delaying this step could have significant consequences down the line. Whether you choose to consult with a local attorney or reach out to us at Cardon Law, the important thing is to make that first step toward securing your legacy. Your future self will thank you for it.