Debunking 3 Common Estate Planning Myths
Did you know that estate planning is one of the most misunderstood areas of family and financial planning? If you think you’re too young to have an estate plan, we need to have a discussion. If you feel you don’t need an estate plan because you have a financial plan, we should talk. If you think you’re too old to get your estate plan together, we need to have a question and answer session. If you are in any of these situations, you may need to read about a few common estate planning myths.
3 Common Estate Planning Myths:
Myth #1: You Only Need an Estate Plan if You are Very Wealthy.
Estate planning is definitely not only for the wealthiest segment of the population. If you own property or have anyone who depends on you for their care, you need an estate plan. It doesn’t matter how big your estate is or what’s in your bank account. Age, marital status, number, and size and value of your assets, none of this determines whether or not you need an estate plan. If you have a spouse, minor children, or other dependents, you need an estate plan. If you have a bank account, any investments, a vehicle, or any property, you need an estate plan.
The estate plan is critical to protect the interests of your loved ones and their future financial needs. Estate plans have several purposes:
1) protecting your dependents and your income during their lifetime,
2) naming guardians for any minor children,
3) designating beneficiaries,
4) efficiently transferring property to named heirs,
5) managing tax exposure,
6) naming your trustee and executor,
7) avoiding probate,
8) indicating medical treatment wishes, and
9) Indicating wishes and preferences for end of life and funeral arrangements.
Myth #2: Estate Plans Only Control What Happens to Your Assets After You Are Gone
While an estate plan will address asset management and distribution, it also focuses on your legacy and needed incapacity planning. Legacy planning is very personal and varies greatly depending on your situation and your wishes. Legacy planning may include charitable planning goals and gifting strategies, but can also include information about experiences, memories, etc. that are significant to you and your family.
Incapacity planning is vital to prepare for unexpected events at any stage of life. It can include naming guardians for minor children, instructions for their care, management of your affairs if you are unable to manage them for yourself, the type of care you prefer if you become incapacitated, who will make medical decisions on your behalf if necessary, etc.
Myth #3: A Will is Really All You Need to Oversee All Your Assets
While a will is a legal document and is also typically included in your estate plan, it is not a good idea to depend on it alone to oversee all your assets. It does instruct how property should be distributed after death, and it allows you to name an executor to serve as your personal representative overseeing property distribution and probate. Still, certain assets may not be addressed by a will.
For instance, life insurance policies or qualified retirement accounts (401(k)s, IRAs, etc.) that have a beneficiary designation are not included in a will. Any accounts with a pay-on-death (POD) or transfer-on-death (TOD) designation would not be included in a will either. These assets transfer directly to the designated beneficiaries and are not subject to probate. Because they are handled differently than other assets, it is imperative to update the beneficiary designations on life insurance policies, retirement accounts, POD and TOD accounts regularly and immediately whenever a significant change occurs in your life.
Additional documentation will be included in your estate plan to protect your assets. In addition to a will, your estate planning attorney will create: a power of attorney, a living will or healthcare proxy, and trust (not in every case, but it is beneficial for many).
If you need assistance determining what to include in your estate plan or if you need to update your estate plan, please get in touch with one of the experienced Florida estate planning attorneys at Elder Solutions Law Firm, PA. We have the experience you need to protect your family with comprehensive wealth planning designed for each client’s individual needs.