According to a survey by AARP, 60% of Americans do not have an estate plan in place. I am not surprised. Estate planning is so important, yet so many people do not understand why they need a plan. And so many people have fallen victim to several misconceptions about estate planning in general and the following is just a few of these myths about whether you need a comprehensive plan in place:
- “I am not wealthy, so I do not need an estate plan.”
Estate planning provides so many non-tax savings benefits regardless of your asset values or income. Probate avoidance is one primary example. Another example is if you have minor children, you need a Will in place to properly appoint guardians and conservators for them. It can also address the care of your pets and provide for the transfer of business ownership interests and property interests in accordance with your wishes, and not the State of Michigan’s wishes (without an estate plan, your assets will pass in accordance with the State of Michigan’s intestacy rules).
- “I’m not old enough for an estate plan.”
Just as estate planning isn’t just for the wealthy, but it also isn’t just for the elderly. Even 18 year olds need some estate plan documents in place. Even if you are just a college student or you have no assets or any family members that depend on you for support, you still need a Durable Power of Attorney and Living Will and Patient Advocate Designation in place, at a minimum. Accidents happen. You could become disabled or incapacitated in a moment’s notice.
- “All of my assets are owned in joint tenancy. This is a cheaper way to avoid Probate than putting them in a Revocable Living Trust.”
Technically, it is true that assets owned jointly with someone else will pass to the surviving owner upon your death outside of the Probate process after the first person dies. However, it is not always a good idea for several reasons, some of which are: (1) there could be gift tax implications, (2) it does not completely avoid Probate – it postpones Probate until the death of the survivor, (3) it is not protected from creditors of the other joint owners, and (4) it will result in the transfer of full ownership of the asset to the survivor and that may not be what you intend.
- “I already have an estate plan in place. I don’t need to worry about it anymore.”
I always recommend a review of your estate plan every few years or after any major life changes such as, for example, the birth of a child, divorce or remarriage, or a significant increase or decrease in wealth. Additionally, your relationships with other family members are always evolving and changing. And as you acquire assets over time, you need to be sure ownership of those assets are commensurate with your estate planning objectives.
- “I have a Will and don’t need a Trust or anything else.”
A Will alone does not provide a comprehensive estate plan. Having a Will (with no Trust) ensures your asset swill go through Probate, which can take a long time and be expensive, depending on the value of your assets. A basic comprehensive estate plan includes additional documents such as Durable Powers of Attorney, Living Wills and Patient Advocate Designations, and Revocable Living Trusts. The benefits of having a Revocable Living Trust included as part of your plan are discussed here.
However, many people also KNOW they need an estate plan, but feel overwhelmed and think that there are many hurdles in the way to get started. Please feel free to reach out to me, even if you are only jus thinking about it and don’t know how to get started.
Please feel free to reach out to me if you have any questions!