There are lots of misconceptions – and a lot of misinformation – about estate planning. Also, estate and tax laws are complex and they change frequently. In this post, we will attempt to clear up four common myths we hear often about estate planning.
1) Estate planning is not just for the wealthy.
Estate planning is of course essential for the wealthy. However, proper estate planning encompasses much more than only the dollar amount of your estate. It is prudent to ensure that your finances are taken care of if you become mentally or physically incapacitated, ensure that decisions about your health care are carried out the way you would like even if you are not able to make them, and ensure that you take care of your children and other beneficiaries.
2) It is not too early to start planning
We never know when we might need estate planning and by then, it will be too late. For example, history is replete with the stories of celebrities who unfortunately died before creating a will, many of them at a relatively young age. Furthermore, health care incapacity planning should be done as soon as you are responsible for yourself.
3) The state will not take your assets.
If you pass away without a will, each state will apply its “laws of intestacy” to determine who will get what. Generally, you will not like the results – no client of ours has ever drafted a plan that mirrored the state’s intestacy laws. Drafting a will gives you control over the process, including, importantly, naming a guardian for your children if that need should arise, which is probably not a decision you want a court or the state to make.
4) Your estate is likely to end up in probate.
Probate can be a long and expensive process in which one or more courts decide who will inherit your assets. While a will provides the court with guidance on your wishes, it doesn’t actually avoid the process altogether. Since a will is public information, it can be easily contested in court, adding more time and cost. In addition, if you have real estate in more than one state, each property may have to go through probate in its respective state. Therefore, it is important to plan in a manner that avoids, or at least minimizes, probate.
Joseph E. Fournier is an Attorney and a CPA who has more than twenty years of experience in a variety of business legal matters, including start-ups and company formations, drafting shareholder and operating agreements, contracts, employment law, commercial litigation, tax planning and audit defense, and mergers and acquisitions (M&A). He also handles estate planning matters, such as business succession planning, wills, trusts, and probate.