Death is not often enjoyable to think about. But planning for it is an important part of managing your assets and ensuring your loved ones are protected.
Despite the importance of an estate plan though, more than 60% of Americans say they don’t have any essential estate planning documents in place, such as a will or living trust, according to a survey by Caring.com.
One reason why is the simple fact that end-of-life planning can make people uncomfortable. Most people would rather put it off – like death itself.
Another reason is there are many myths out there about estate planning. They can lead people to think they can’t afford an estate plan or don’t even need one. Fall for them and you could leave your family unprepared for the inevitable.
Here are the facts to debunk some of the most common myths of estate planning. The truth can help you better understand the real purpose of estate planning. And when you focus on the purpose of estate planning – protecting your loved ones, putting your assets toward a good cause, etc. – it can feel less depressing and more rewarding.
Only the wealthy need estate planning.
The truth is estate planning can benefit everyone, regardless of level of wealth. The size of your estate, be it a single bank account or home, does not matter. An estate plan makes sure what you do have goes to the right person or organization. Further, it ensures the right decisions are made on your behalf and your wishes are fulfilled.
Estate planning isn’t necessary until later in life.
Tragedy can strike at any moment. One of the best things you can do for your loved ones is to have a plan in place in the event of your sudden passing. This is especially so for young parents. Estate planning can involve establishing guardians and making sure your children are cared for into adulthood.
All you need is a will.
A will is not the beginning and the end of estate planning. There are several more estate planning steps everyone should take. For example, designating a power of attorney to make sure someone you trust makes medical and financial decisions on your behalf in case you are incapacitated.
Also, creating a trust with instructions on how your property is to be managed and then distributed by a trustee upon your death. It can help prevent beneficiaries from misusing the money you plan to hand down. While a will may have to go through the probate process, trusts pass outside of it, saving your heirs time and money.
You don’t have to update your beneficiaries.
When it comes to your financial assets, it’s not your will but the names on your accounts that really matter. Beneficiary designations on your benefits, such as your retirement accounts and life insurance, override your will. Naming the wrong person(s) or failing to update your benefit documents, can create a mess for your heirs and leave your wishes unfulfilled. If you divorce and remarry, for example, your ex-spouse could end up inheriting your assets rather than your current spouse.
Your family can easily sort everything out.
If you don’t have the proper documents in place, then your estate will have to go through the difficult probate process. Probate court is the legal process that deals with the assets and debts left behind after someone dies. It can be expensive and time consuming, which can place a lot of stress on your loved ones. With an estate plan, you can avoid placing an undue burden on your family.
You can do it on your own.
Estate planning is not easy. Each document needs to be written and filled out properly. Then there are taxes and other laws to navigate, which can vary from state to state. Further, there are several less-than-obvious situations to plan for, such as what happens if your beneficiary passes or becomes incapacitated.
You can just set it and forget it.
Your life changes, your assets change, the rules change. That means you’re likely going to have to update your estate plan at least once. You don’t want to let anything go overlooked – an old 401(k), a new spouse – nor let new laws negate your wishes.
If you haven’t updated your estate plan in a while or haven’t started planning, watch a replay of our webinar, “Estate Planning in 2018 and Beyond – What You Need to Know.” Estate attorney Matthew Ferrara discusses how you can protect your family and assets and pass on the legacy you’ve spent a lifetime trying to build.