To many it seems that estate planning is like a mysterious woodland creature. Sightings are reported, but descriptions of the animal do not all match, and an accurate picture of the real thing remains illusive.
Dispelling the myths is a good start in gaining an accurate understanding of estate planning (the elusive creature). Once you begin to have an accurate picture, estate planning does not seem so wild or elusive, and you can tame it to provide you peace of mind. This article exposing 5 Estate Planning Myths will tackle some of those myths and hopefully provide a clearer picture of estate planning in the process.
1. Estate planning is just for the wealthy.
Many public discussions of estate planning by attorneys and financial advisers focus on federal estate taxes. With the federal estate tax exclusion amount at $5.54M in 2016, and the Illinois exclusion amount set at $4M, I am not surprised that estate planning seems to be only for the wealthy. If estate planning does not seem to be for common folk, that is just because professionals focus inordinately on the wealthy whose complex estates they want to plan. The focus on estate taxes by estate planning professionals is a way for them to demonstrate their experience and knowledge (show off). they also want to market to the wealthy because they make much more money dealing with complex estate planning.
The truth is, estate planning is about much more than estate taxes. The fundamentals of estate planning apply to virtually every adult with assets or income. Estate planning is about making sure that someone you choose will handle your finances if you become incapacitated; that someone you choose will make the decisions about your personal care if you are not able to make personal and health care decisions for yourself; that your estate goes to the people you want to receive it; and that your intentions will be carried out after you pass on from this world. Estate planning is for everyone who has loved ones, and estate planning is advisable for everyone who has assets of any amount who wants to plan where they go and who they go to.
2. I am too young for estate planning.
I am reminded on a continual basis that there are no guaranties in life. The reminders come all too often, sometimes, dotting the landscape of my life and people I know. When I wrote this article I had just been called by an old neighbor whose son, only 57 years old, died suddenly a week after routine surgery. Three twenty somethings that went to school with my children died this week. A friend who was going to join me at a banquet had to cancel out the day of the event because his aunt died suddenly the night before.
We do not know when our time on this earth will come to an end. It may be a gradual slip into the night or a sudden occurrence, but few people rise from sleep in the morning or go to bed at night knowing that they have lived their last day in this world. We never know when the estate planning we should have done will be needed; and by then, it will may be too late.
I counsel many people who rue the fact that their parents have put off doing estate planning until dementia is firmly set in and any planning will be of questionable validity. Estate planning needs to be done when you have all your faculties, and, by the time dementia has set in, it may be too late.
In my practice, I have seen many dozens of examples of people who died without proper estate planning in place. I can walk into any probate court in the state or country every day and see examples of estates in disarray with loved ones trying to pick up the pieces. Estate planning may even be more important at a young age because the circumstances that take people at a young age are usually unforeseen. If you are an adult with assets and family or friends that are important to you, the time to do your estate planning is now.
3. If I pass away without a will, the state will get my assets.
I marvel that people who believe this myth are not compelled to get their estate planning done right away! … but then, see myth one and two above. The good news is that we all have, essentially, a “default” estate plan. The state laws of “descent and distribution” determine who will get your estate. The website, mystatewill.com, summarizes those laws for every state if you want to see what your “default estate plan” looks like. If you do not like what you see, then you should prepare a Will and/or a Trust that matches your desires and accomplishes the goals for your loved ones left behind, and get it signed.
… and to dispel the myth, the State does not get your assets when you pass, except under very unusual circumstances; but the state does dictate who will get your estate and how it it will be handled if don’t.
4. Doesn’t a Will avoid probate?
The probate animal is, perhaps, the most mysterious of the estate planning creatures. People are often unclear what probate is, but they are sure they want to avoid it nevertheless! The truth is that a Will does not avoid probate, plain and simple. If you want to avoid probate, there are ways to avoid it, but a Will is not one of them.
First of all, we should understand what probate is: probate is a court proceeding designed to handle the administration of an estate in an orderly (though slow and cumbersome) process. A Will (if you have one) makes sure that the process is handled by the person you designate and the assets are distributed to the people you want to have them when it is finished. If there is no Will, the process is directed by the Probate Act (your “default estate plan” – see #3). Since a Will is public information, it becomes a public document when it is filed. Notice must be given to people as required by state law, like heirs and creditors. Anyone with an interest in the estate has a right to intervene and contest the Will. If you own real estate in more than one state, the real estate in different state(s) may also have to be addressed in separate probate cases in each of those states. There are attorneys’ fees, and court costs and other expenses involved. The process in Illinois takes about nine (9) months to a year on average.
Now, a little understanding will put this myth to bed. Probate is the default process for handling an estate. It is the process the law requires unless the assets have built in mechanisms for passing on death. There are various options (built mechanisms) for avoiding probate, including holding title to property in some form of joint tenancy and having payable on death or beneficiary designations on certain types of property. Estate planning, therefore, involves not only preparing a Will but analyzing how all of one’s property is owned. It usually entails strategic changes in how property is owned to work in harmony with the estate plan and the plan documents.
For avoiding probate, trusts are by far the best and and most flexible ways of handling an estate. if you want to read more about avoiding probate by using a trust, see Avoiding Probate is a Matter of Trust.
5. I don’t need a lawyer to prepare a will.
Actually, this is not a myth. It is true. There are self-help websites and guides available to help people draft their own wills and other estate planning documents. If you feel confident in your ability to read and understand the principles of law that apply to estate planning and have the time and inclination to learn, you can draft your own documents. Of course, you can draft your own documents even if you don’t know what you are doing.
That, of course, is the danger. Not knowing what you don’t know can end up creating quite a mess for your loved ones to clean up.
While many “canned” forms are available to cover common situations, starting with the form that best suites your situation is critical. A person may not know all the options, or how they relate to specific circumstances, and the likelihood of choosing a form that does not really suit a person’s situation and unique concerns is high. A person may not be aware when documents are inappropriate for their circumstances or when better options are available.
Attorneys use forms too. This is nothing new, but no form is used without revisions. Forms are meant to be changed and modified to address individual circumstances and desires. For most people, using a reputable attorney who does estate planning is better than “doing it yourself” and risking the possibility of creating more burdens and problems for your family that, ultimately, frustrate the important goals one has.
A good attorney should be able to identify what the cost will be for typical estate planning. He or she should present options to consider and take the time to explain the nuances of estate planning that apply to your specific circumstances so that you can understand how the options apply. A good attorney should help you make informed decisions.
You can search for an attorney by asking for referrals from family, friends, and other professionals, by using the lawyer referral service of your local bar association or by using Internet resources like AVVO or lawyers.com which provide helpful information and rating for attorneys based on peer and client reviews. Finally, don’t forget to ask your employer about discounted legal services plans they may offer.
The estate planning creature is not all that elusive or frightening in the end. The beast is easily captured and tamed. When you have done your estate planning, it will give you peace of mind knowing that you have put your estate in order for your loved ones.Kevin G. Drendel Drendel & Jansons Law Group 111 Flinn Street Batavia, IL 60510 (630) 406-5440 www.foxvalleyestateplanning.com email@example.com
For more articles visit our Estate Planning Blog
For estate planning resources, visit our Estate Planning Resource Page.
If you want help or advice regarding a specific matter, please contact us.