There are many aspects to thinking about estate planning in terms of your retirement income. But who likes to think about their own death? This is a big reason many people procrastinate on this crucial planning.
We’ve all heard about people who have passed on unexpectedly before planning to provide for their loved ones and the results were unfortunate for their survivors. Even when you take on the task of estate planning, there are a number of common myths that can lead you to costly mistakes.
MYTH #1: ONLY WEALTHY PEOPLE WILL NEED AN ESTATE PLAN
You don’t have to be a multi-millionaire to benefit from an estate plan. When you sit down and calculate the value of your home, possessions, vehicles, savings, and retirement accounts, you’ll likely see the total value is worth protecting for your loved ones. Estate planning also ensures your finances are taken care of if you’re incapacitated and that decisions about your health care are carried out according to your wishes.
MYTH #2: I’M TOO YOUNG FOR ESTATE PLANNING
When it comes to creating a Will and an estate plan, you’re never too young. Look at some of the young, famous people who died before creating an estate plan who ended up having their assets battled over via long, drawn-out court battles among their survivors.
Even if you’re young and single, an estate plan ensures your financial and health care wishes are followed if you become incapacitated or pass unexpectedly.
If you have young children, creating a Will and an estate plan ensures their needs are taken care of according to your wishes.
If you and your spouse pass away together because of a tragic accident, a Will and an estate plan ensures who will be legal guardians to your children. If you did not have children, make sure the assets you worked so hard to build either go to family or are donated to protect your legacy.
MYTH #3: I DON’T NEED A WILL OR ESTATE PLAN BECAUSE MY SPOUSE GETS EVERYTHING
This is not entirely true. When you don’t have a Will or an estate plan, the probate laws in the state where you and your family live determine how your assets are distributed upon your death.
The distribution depends on how spouses share ownership of property. It also depends whether you live in a “common law property” state or a “community property” state.
MYTH #4: IF I HAVE A WILL, MY ESTATE ASSETS WILL NOT GO INTO PROBATE
Though there are ways to protect your estate from probate, having only a Will is not one of them. When you pass on, your Will is filed in court along with a probate petition, then the court conducts an inventory of your assets.
Your designated heirs get their share only after your creditors, and other related probate costs, are paid. It gets even more complicated if you own property in different states. Since this information is public record, others may step forward to contest your Will.
MYTH #5: IF I DON’T HAVE A WILL, THE STATE WHERE I LIVE GETS EVERYTHING
This is only true if you have absolutely no other living heirs determined by law in your state of residence. If you do have living relatives, and pass on without a Will, state law determines who qualifies as “heirs-at-law,” in a particular order, and also what proportion of your assets they can receive.
MYTH #6: ONCE I PREPARE MY WILL AND ESTATE PLAN, I’M DONE
There are potential life changes that require changing your Will and estate plan on a fairly consistent bases. If you get divorced, or if your spouse predeceases you, it’s important to change beneficiaries and power of attorney accordingly – especially if you remarried before your death.
You also need to review and update beneficiaries on retirement-savings accounts and life insurance policies. Many an ex-spouse has collected these assets because the beneficiary was never changed to the deceased’s current spouse.
MYTH #7: I DON’T NEED AN ATTORNEY TO DRAFT MY WILL AND ESTATE PLAN
This is only partially true if your situation and assets are relatively simple. However, as discussed in Myth #1, your assets may have more value than you realize.
Though the internet offers free downloads of do-it-yourself documents, it’s smart to have an estate attorney review them to ensure you haven’t overlooked something or made mistakes.