Estate planning. You’ve heard the phrase, but do you know what it is? You probably have it on your list of things you should do, but you may not think it’s a priority. . . perhaps because of some of the following common estate planning myths and misconceptions.
Myth #1 – Estate planning is only for the wealthy. There are many levels of estate planning, beginning at its most basic and continuing upward with more advanced planning as you move through different financial stages. Regardless of whether you have a multi-million dollar estate or something more modest, you need to take steps to ensure your assets are distributed to your heirs according to your wishes. Everyone should have a basic estate plan, which consists of a Will, Trust, Advance Health Care Directive and Durable
Power of Attorney.
Myth #2 – Only the elderly need to consider planning. You can’t know what your future holds, so it’s important to have an estate plan in place before your “golden years,” in the event you become incapacitated or die prematurely. If you’re unable to see to your own affairs, due to a serious accident or other health condition, a Durable Power of Attorney provides a trusted advocate with the authority to carry out your stated wishes. Similarly, having an Advance Health Care Directive allows you to specify your wishes with respect to healthcare and life-saving treatment. These circumstances aren’t limited to the elderly—and neither is passing away—so it makes sense for everyone to have a plan in place to provide direction to their heirs.
Myth #3 – You only need a will. While having a will is important, it’s just one of the four corners of a basic estate plan. If you lack the other three, your estate will have to go through probate upon your death (no trust), and your heirs won’t know what you want them to do in the event that you’re incapacitated (no Durable Power of Attorney) or facing a decision regarding life-saving treatment (no Advance Health Care Directive). Your will needs to be supplemented with these other important vehicles.
Myth #4 – Estate planning is a one-time event. Putting an estate plan in place is an important first step, but it must be examined and possibly changed as time passes. You may experience life changes that cause you to revisit earlier decisions, e.g., divorce, financial windfalls or a death in the family, and your plan may also need modification based on new legislation. It’s a good idea to review your estate plan on a regular basis to ensure it reflects your current wishes and situation.
Myth #5 – It doesn’t matter who I name as a fiduciary/successor trustee. Au contraire, the person who fills this role has vital responsibilities with respect to your estate, so the decision on who’s best suited for it shouldn’t be made lightly. Many people make arbitrary choices (often a spouse or child), without stopping to think about whether that person has the time and expertise required to do the job. Your fiduciary/successor trustee should be someone you trust who has experience dealing with estate issues. . .and it doesn’t have to be a family member. In many cases, you may be better served having a professional fiduciary.
I hope this information has debunked some of the myths and misconceptions that surround the estate planning profession. If you don’t have a plan in place, what are you waiting for? If you do, when’s the last time you reviewed it?