Estate Planning Myths Debunked

Estate planning is intimidating to people who think it is only for the wealthy or do not want to think about their own mortality. However, not addressing estate planning can cause families to suffer everything from the expense of estate battles to fractured families. A recent article from Forbes, “10 Estate Planning Myths You Shouldn’t Believe,” addresses the most common myths.

Estate planning is for the wealthy. Many articles focus on strategies to avoid paying the federal estate tax, which is only an issue if your estate is worth more than $12.92 million. However, estate planning is also about three things: planning for your finances to be taken care of if you are incapacitated, making sure your health care decisions are carried out the way you want even if you are not able to communicate your wishes, and making sure that your children and other heirs are cared for when you die. Estate planning is for anyone who, because of accident, injury, illness or death, needs assistance, which means everyone.

You’re too young for estate planning. The news is filled with stories of celebrities who die unexpectedly before creating a Will. We never know when we may need estate planning.  As soon as your turn 18, you are no longer a "dependent" of your parents, and you may need assistance with things like lawsuits, signing of documents if you are unable to do so, assistance with healthcare decisions, and so much more.  Again, this applies to everyone.

If you die without a Will, the State will get your assets. If you die without a Will, each State applies intestacy laws to determine who inherits your property. You or your family may not like how the intestacy laws distribute property. However, there won’t be anything they can do about it. Even if you do not care about your assets, if you have minor children, you need a Will to determine who would be the guardian of your children if both parents die. Otherwise, the Court will decide for you.

You don’t have to worry about probate if you have a Will. This is wishful thinking, as probate can be long and expensive in some states, especially if more than one court decides about your assets. While a Will gives the court guidance on your wishes, it doesn’t avoid probate entirely. A Will becomes public information. If you own property in more than one state, each property may have to go through probate in its respective state.  We, at Curran Estate & Elder Law, Berks County, PA, can help by setting up a Trust to ensure that you do not have to probate in multiple different states.

You can draft these documents without an attorney. Yes, there are many forms online, and your hospital may have forms available for Health Care Proxy. However, you may be creating more problems than you solve by doing so. There are nuances in financial and health care decisions not addressed by standard forms. Wills and Trusts need the guidance of an experienced estate planning attorney to ensure that the documents align with state laws and accurately reflect your wishes.

No one needs an estate planning lawyer. There may be complicating issues in your life of which you are unaware. An experienced estate planning attorney needs to review any estate planning documents to prevent problems for you and your family. Estate planning practitioners are accustomed to families coming for help after a do-it-yourself estate plan has gone wrong.

To avoid probate, you need a Trust. Jointly-owned property generally passes to the other owner without going through probate, as do assets with beneficiary designations, including life insurance, annuities and retirement plans like 401(k)s and IRAs. Each state has its own rules for titling property to facilitate the transfer when a joint owner dies.

Trusts avoid estate taxes. If you’re worried about having a taxable estate, talk with an experienced estate planning attorney. Certain trusts can be part of a strategy to reduce and sometimes eliminate estate taxes (both federal and state).

You don’t have to worry about the estate tax. You may not need to worry about the federal estate tax, but some states have their own estate/inheritance tax with far lower thresholds. Add in the value of your home, life insurance proceeds and retirement accounts. Then, talk with an estate planning attorney.

You’ll have to pay a gift tax if you give someone more than $17,000 annually. If you give an individual more than $17,000 (for 2023) in a single year, you reduce your federal lifetime gift and estate tax exclusion amount. You must start paying a gift tax only after you use up the entire exclusion. You still have to file a gift tax return and report how much you’ve reduced your lifetime exclusion amount and claim your credit against estate tax.

There are many misconceptions about estate planning, all of which can be cleared up with an appointment with an experienced estate planning attorney. This is one part of your life where a skilled professional can make a big difference for you and your family.

Reference: Forbes (Oct. 2, 2023) “10 Estate Planning Myths You Shouldn’t Believe”