Estate planning is a topic often misunderstood and shrouded in myths. Many believe it's a matter reserved solely for the wealthy, while others assume they're too young to consider it. The reality is that estate planning is for everyone, as it encompasses vital aspects like healthcare decisions and the welfare of your loved ones. Whether you have significant assets or not, estate planning plays a crucial role in safeguarding your future, ensuring your wishes are honored, and making sure your children or heirs are well cared for. So, let's debunk some of the common misconceptions that have clouded this essential practice. A recent article from Forbes, “10 Estate Planning Myths You Shouldn’t Believe,” addresses the most common myths.
Estate planning is for the wealthy. Many articles focus on strategies to avoid paying the federal estate tax, which is only an issue if your estate is worth more than $12.92 million. However, estate planning is also about three things: planning for your finances to be taken care of if you’re incapacitated, making sure your health care decisions are carried out the way you want even if you aren’t able to communicate your wishes and making sure that your children and other heirs are cared for when you die. Estate planning is for anyone who may become seriously ill or die, which means everyone.
You’re too young for estate planning. The news is filled with stories of celebrities who die unexpectedly before creating a will. We never know when we may need estate planning.
If you die without a will, the state will get your assets. If you die without a will, each state applies intestacy laws to determine who inherits your property. You or your family may not like how the law distributes property. However, there won’t be anything they can do about it. Even if you don’t care about your property, if you have minor children, you need a will to determine who would be the guardian of your children if both parents die. Otherwise, the court will decide for you.
You don’t have to worry about probate if you have a will. This is wishful thinking, as probate can be long and expensive, especially if more than one court decides about your assets. While a will gives the court guidance on your wishes, it doesn’t avoid probate entirely. A will becomes public information that can be easily contested in court. If you own property in more than one state, each property may have to go through probate in its respective state.
You can draft these documents without an attorney. Yes, there are many forms online, and your hospital may have forms available for Health Care Proxy. However, you may be creating more problems than you solve by doing so. There are nuances in health care decisions not addressed by standard forms. Wills and trusts need the guidance of an experienced estate planning attorney to ensure that the documents align with state laws and accurately reflect your wishes.
No one needs an estate planning lawyer. There may be complicating issues in your life you are unaware of. An experienced estate planning attorney needs to review any estate planning documents to prevent problems for you and your family. Estate planning practitioners are accustomed to families coming for help after a do-it-yourself estate plan has gone wrong.
To avoid probate, you need a trust. Jointly owned property generally passes to the other owner without going through probate, as do assets with beneficiary designations, including life insurance, annuities and retirement plans, like 401(k)s and IRAs. Each state has its own rules for titling property to facilitate the transfer when a joint owner dies.
Trusts avoid estate taxes. If you’re worried about having a taxable estate, talk with an experienced estate planning attorney. Certain trusts can be part of a strategy to reduce and sometimes eliminate estate taxes.
You don’t have to worry about the estate tax. You may not need to worry about the federal estate tax, but some states have their own estate tax with far lower thresholds. Add in the value of your home, life insurance proceeds and retirement accounts. Then, talk with an estate planning attorney.
You’ll have to pay a gift tax if you give someone more than $17,000 annually. If you give an individual more than $17,000 in a single year, you reduce your federal lifetime gift and estate tax exclusion amount. You must start paying a gift tax only after you use up the entire exclusion. You still have to file a gift tax return and keep track of how much you’ve reduced your lifetime exclusion amount, so to avoid the hassle, you may want to stay within the $17,000 annual amount.
In dispelling these myths, we hope to emphasize the significance of proper estate planning. Irrespective of your wealth or age, it's a fundamental responsibility that shouldn't be delayed. Estate planning ensures your financial and healthcare preferences are upheld, prevents the state from making decisions on your behalf, and minimizes the burden of probate on your loved ones. Vick Law, P.C. can help tailor a plan that aligns with your specific needs, so you can enjoy peace of mind knowing your future is secure. Avoid the pitfalls of misinformation and make the right decisions for your legacy, because, in the realm of estate planning, knowledge truly is power. Book a call with Vick Law, P.C., a premier estate planning and elder law practice in Greenwood, Indiana today.
Reference: Forbes (Oct. 2, 2023) “10 Estate Planning Myths You Shouldn’t Believe”