4 Unfortunate Estate Planning Myths
Let’s say your finally considering getting an estate plan created. Congratulations, your taking a big step into creating something that will give your family relief in which a plan is laid out in the worst-case scenario. After all, going through the process may sound like it can be stressful and even scary. I can tell you that the process can be straightforward as long as we’re cataloging your assets, determining how their going to be distributed, and taking you through the bureaucratic red tape that makes it appear more complex then it actually is.
How often are things completely straightforward? Unfortunately, it’s rare. In fact, you’ve probably gone ahead and started to do your own research. You’ve read some articles. You’ve picked up a book. You’ve seen all the rules and ideas that your estate plan can have. But you also probably have a lot on your mind. Who am I going to leave my home to? Whose going to receive my jewelry and heirlooms? What if I have someone in the family with special needs? This will undeniably cause your knowledge of estate plans to collide with the clouding of your own emotion. This is why I always recommend getting in contact with a lawyer before making a decision.
I’ve come across my fair share of questions from clients with information they’ve found. Sometimes its about a law in the state of California or about how it connects with Medicare. I also get questions about things I need to ensure is either outdated or even false. I’m going to go through four things I’ve seen as a misconception about estate planning that need to be cleared.
1. An estate plan should be based solely on tax mitigation
It may be tempting to work your estate plan around taxes, but I can tell you that planning everything only around taxes is a big mistake. Id say only 3% of people need to be worried about paying a federal estate tax. When my clients ask about taxes, I always ask about assets first. That determines if anything will be need to be reported to the government, but more importantly, keeps the focus back on family.
2. I should leave everything to my children
Before you get angry, I’m not at all saying you shouldn’t leave your children with nothing. In fact, I would encourage leaving your assets to them. What I’d want to explain is that rather then just putting their name down on paper and moving on, we’d want to see if those assets can be used in a better way. It’ll ultimately be yours to decide and I can help you decide how your assets are distributed in a fair manner.
3. All my children should get an equal amount
Yes, it’s okay to say no. Most parents are concerned that they’re not treating their children equally. Yes it might be good in spirit to split a million dollars between three of your kids. But lets face it, are all kids really the same. A lot of them will have different goals, different skills, and a better mindset. As difficult as the decision can be, you’ll feel better if the assets are put in the hands of people you know will continue to keep it’s value.
4. I can set up a trust and take care of everything
So you think you can create a trust? I admire your gumption, but your in for a complex time of books, rules, and regulation. A good example would be if you have a large value of assets, then a typical estate plan will involve setting up a trust. However, depending on a number of factors, it could either be revocable or irrevocable. Then there’s the process of setting beneficiaries and whether they can set up the fiduciary. We can certainly recommend the direction your estate can go and how a trust in created for the person in question, but I’d advise against doing it yourself.
It’s important to note that it’s always best to speak to an attorney before making any decisions regarding an estate plan or updating them. I can give you an ease of mind by introducing the subject in a simple manner. If you want more information, you can contact my office for more information.