5 Estate Planning Myths Debunked!

“Estate planning.”  The phrase just sounds so dry and foreboding.  But, despite appearances, estate planning is a valuable and relatively easy way to avoid the uncomfortable situations that we imagine with those icky conversations about death and money.   

In fact, that’s Myth 1:  Estate planning is just about death and money.  No!  You need not consult the Grim Reaper when you think about this planning...the focus is really on caring for your loved ones.    

Myth 2:  Que Será, Será

I don’t care what happens to my possessions after I’m gone, so I don’t need to do any planning.

Upon your death, your estate (no matter how big or small) will come into contact with a court (known as Probate).  If you die without any documents in place, a court will allocate your possessions according to the State’s “intestate” rules.  Court is not free, either of expense or time.  And since you will not be around, your family will be left to deal with it.  Is that what you really want?

Plus, an estate plan can address important matters other than your possessions—you appoint a guardian to care for minor children through your estate plan.  If you do not do so, your relatives would petition a court for the right to care for them.  Would you trust a judge, unfamiliar with your family, to decide who should gain custody? What if she picked your in-laws?!?

Myth 3:  Too Rich for My Blood

I don’t own enough stuff to make an estate plan worthwhile.

Estate plans do manage assets, and also incorporate important tax-savings provisions for those with estates that would be subject to estate tax.  But, they also can include documents that operate during your life regardless of the value of your assets.  For example, an estate plan includes Powers of Attorney for Property and Powers of Attorney for Health Care.  Powers of Attorney allow you to appoint an agent who will act on your behalf in the event you are unable.  Without them, your spouse, closest relatives or companion will have to ask a court for authority over your financial affairs and health care provision.  In addition, if your relatives go to court to get someone appointed to manage your affairs, they must ask a judge to rule that you cannot take care of your own affairs—a public airing of a very private matter.

Consider also that you and the IRS may disagree on what you “own” for estate tax purposes—the death benefit of any life insurance policy that you own and the value of certain gifts you made before your death are just a couple  of the things the IRS considers taxable at your death.  A proper estate plan will minimize tax liability (and consequently maximize the assets left to pass to your loved ones).

Myth 4:  All in the Family

My family knows what I want and they’ll make sure everything is handled.

Without an estate plan, your family has no control over how your assets are administered (see Myth 2)—the State’s laws will determine who gets what.  Illinois law provides that if a married person dies without an estate plan, ½ of the assets go to the surviving spouse, and the other ½ is split between descendants (e.g., children).  The rules favor blood relatives, which may be problematic for blended families—descendants may not include those who you actually consider your children.  In particular, stepchildren would not share in your estate under the intestate rules.  However, in an estate plan you can provide that stepchildren are to be treated the same as your natural children.

Myth 5:  The First Thing We Do, Let’s Kill All the Lawyers

I don’t have the time or money to meet with an attorney.

It is best to have an attorney prepare your estate plan.  Laws can be very specific, and often forms available online do not take into consideration nuances in states’ laws.  Plus, an attorney can help sort out complex family or financial situations.  But it doesn’t have to cost a fortune or be a big ordeal.  Many estate planning attorneys provide free consultations, make house calls, and offer flat fee packages based on your needs.