Most people have heard of estate planning and its general importance, but not everyone is aware of what the planning actually requires. Estate Planning ensures that your loved ones and assets are protected in the event of your death or incapacity so it’s equally as important during your lifetime and at your death. Here are three common misconceptions about estate planning.
“Estate Planning is for the Wealthy.”
One of the most common misconceptions about estate planning is that it’s only for the wealthy. Estate planning transcends all financial boundaries as everyone truly needs some form of estate planning which can range from simple to complex. For example, the college freshman should have an Advance Directive, Medical Power of Attorney, and Financial Power of Attorney in place prior to departing for school. Once your child turns eighteen (18), you no longer have a say in your child’s medical or financial decisions without a document giving you legal authority to act on your child’s behalf. Sometimes the most important component of a Last Will and Testament, commonly referred to as a Will, for a couple with minor children is who they wish to appoint as Guardian if something happens to both of them and their children are still minors at such time. In addition, if one of your intended beneficiaries has special needs and are the recipient of some form of government assistance, you could effectively cause the termination of such benefits by leaving assets to such beneficiary as some government assistance programs are based off financial qualifications. These are just a few examples to demonstrate the importance of estate planning for everyone and not just the wealthy.
“I have a Will so I’m all set.”
All too often, the focus is on obtaining a Will. Having a Will is a step in the right direction, but to have a comprehensive estate plan you also need to incorporate an Advance Directive, Medical Power of Attorney, Financial Power of Attorney, and potentially a Revocable Trust into our estate plan.
“If I die without a Will, my spouse or significant other will receive my assets immediately”
Each State has its own intestacy laws that outline the default distribution of your estate assets should you pass without a Will. Your assets would pass and be distributed through probate which is the court-supervised legal process of the administration of your estate. The default beneficiaries of your estate vary depending on whether you are married, have children and whether those children are minors. A surviving spouse is not entitled to all estate assets but would have to share such assets with the decedent’s children or parents, in some instances. Unless a significant other is a joint owner or named beneficiary, such person is not entitled to any benefit under your estate. Although most jointly owned property will pass directly to the surviving owner(s), assets held as tenants in common requires your ownership interest to pass through probate.
