Emotional barriers keep many people from estate planning, even if they know what they want to do. It isn’t easy to acknowledge that we will not be on this earth forever. As much as you may want to believe, there is plenty of time to get your estate in order. No one has any certainty that this is true. Here are three myths about estate planning we like to tell ourselves.
I Am Not Rich Enough To Need An Estate Plan
A story about an average couple who met with their estate attorney and completed their estate planning is not likely to make the evening news. Not hearing about everyday people and their stories leads many to assume that investing in an estate plan would be a waste of their time and money. A celebrity or a wealthy person who died without an estate plan or one who made a significant error in their estate planning, which meant that estranged family members are fighting tooth and nail for their piece of the inheritance, is much more likely to make the news. It’s no wonder people don’t think you need an estate plan unless you’re ultra-wealthy.
This logic might make sense if estate planning was only about money — if there was a direct relationship between the amount of money you have and your need for an estate plan. Estate planning is used to determine who will get your money and property upon your death, but it is also used to make plans for your care if you should become incapacitated.
Estate planning allows you to name a person to make decisions for you should you be unable to manage your own affairs. If you do not have an estate plan and you become incapacitated, the court will need to appoint someone to handle your medical and financial affairs for you. By its very nature, involving the court is expensive, time-consuming, and public. Not having clear plans can increase stress within the family and lead to disagreements between family members who think they know what you would want.
You have worked hard to accumulate the wealth you have, no matter how modest. It is important that you decide who gets your hard-earned savings, not the court. Start today on your estate plans while you have the opportunity to formalize your wishes before the state has to step in and decide for you.
I Am Married, And Therefore My Spouse Will Inherit Everything
Many married couples choose to own property and bank accounts jointly. In this case, or if they own property jointly as tenants by the entirety and one spouse dies, the surviving spouse becomes the sole owner. While many married couples prefer this arrangement, some drawbacks need to be considered.
Jointly owning property and accounts is convenient and does allow money and property to be passed to the surviving spouse, but it provides no asset protection. For example, what happens if your spouse dies and you are the sole owner of all accounts and property, and you get in a car accident and then get sued? The accounts and property that were jointly held are solely yours and thus are available to your creditors to satisfy any judgment against you.
What if you die and your spouse remarries? You may have been saving your whole life to pass on an inheritance to your children, but your spouse and their new spouse may have different ideas. Perhaps your spouse’s new spouse likes to spend money on expensive sports cars and new clothes. Your savings could be gone before your children see a penny of it.
Estate planning with your spouse opens the discussion. Each of you can state what you would like to do with your money and property. Then, the two of you can proactively make plans for how your money and property will be used when either or both of you die. The surviving spouse can be taken care of financially, and together, you and your spouse can determine how you will gift the rest of your assets.
Having A Will Protects You From Probate
It is a common misconception that having a will protects you from probate. Unfortunately, this is not the case, whether you have your will drafted by an experienced estate attorney or you do it yourself using an online form.
A will serves many functions, such as
- Designates a person who will serve as your executor and finalize your affairs
- Determines who will receive your hard-earned accounts and property
- Allows you to appoint a guardian if you have minor children
A will must be submitted to the probate court as the first step in distributing your accounts and property. This means your will becomes a public record and is not private.
The degree of probate court involvement varies and depends on the circumstances.
Depending on state law, if the value of your estate is below a certain monetary threshold, anyone who is entitled to inherit from you can file a petition and have the money and property distributed without a full probate court proceeding. Before your money and property can be distributed, those inheriting from you may be required to make court appearances and wait while formal legal notices are posted.
Depending on state law, if the total value of your estate is under a set threshold, an affidavit may be used to collect and distribute your money and property. In some cases, the document must be filed in court. In others, the affidavit can be signed by a successor with priority, such as a spouse or an heir. It may be possible to wrap up your affairs without court involvement in either case.
Generally, affidavits require a certain amount of time to pass. This interval may range from a few days after your death to months. After waiting for the required time period, your successor can sign the affidavit and present it to collect and then distribute your money and property to the rightful heirs.
Supervised probate is more stringent, with the probate judge overseeing every step of the administration process. They must approve every action your personal representative or decision-maker makes. Your executor will need to file every document for your estate with the probate court and wait while it is sent to all interested parties. Each action requires the personal representative to file a legal form, send it to all interested parties and wait while the attorneys settle any disagreements. As you can imagine, the process is expensive and time-consuming.
Unsupervised probate is an option if there are no controversies and all heirs get along. The probate judge does not supervise the will’s administration, but there are still actions the personal representative must take, and they may need to file documents for each step. For example, they may need to file documents such as an inventory of your accounts and properties with the court, and the documents may be distributed to interested parties, but there isn’t a hearing for each step. Since there isn’t as much court involvement, unsupervised probate may be less complicated and less expensive than supervised probate. However, it is still time-consuming, and your affairs are still a public record.
We are available to answer your questions about estate planning and help you navigate the process.