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5 Greatest Misconceptions About Estate Planning

by | Jun 22, 2015 | Estate Planning/Will Preparation |

1. My net worth is too small for an estate plan.

Regardless of your net worth, a comprehensive estate plan ensures that your finances are managed in the event the you become incapacitated or incompetent and that your financial goals are met after you die. If you die without a Will, the state decides who gets your property. The state may not have the same plan as you do in distributing your property at your death. If you have minor children, you can name a guardian in your Will to care for your children; otherwise, the state will decide who will serve as the guardian of your minor children. Also, you can name a Trustee in your Will to manage the property that your minor children may inherit from you. Trustees and guardians named in your Will typically take effect if both parents are deceased.

2. An estate plan is nothing more than a Will.

Every estate plan should include a Will to direct exactly where your assets are to be distributed after you die, but it also should include lifetime management of your property and health. Every adult should have a general Power of Attorney and a Health Care Directive. A Power of Attorney will allow the individual that you appoint as your agent to handle your financial and legal affairs in the event that you are unable to make those decisions for yourself. A Health Care Directive will allow the individual that you appoint as your agent to make medical care decisions for you if you were unable to make them yourself. An estate plan also includes a review of title to assets and beneficiary designations for life insurance, financial accounts, and retirement plans.

3. My Attorney only needs to know my total net worth, and not the individual assets that makeup my net worth.

An inventory of your assets will aid in preparing an estate plan that will accomplish transferring your property in accordance with your wishes while attempting to minimize the tax consequences on your estate. The inventory should include your retirement savings, investments, life insurance, real estate,personalproperty,andbusinessinterests. An inventory will assist your attorney in determining what assets have beneficiary designations to make sure they are up to date and the beneficiary designations are in accordance with other elements of your estate plan.

4. Trusts are only for wealthy individuals.

Trusts are a powerful estate planning tool for all individuals regardless of income, and many can be set up for relatively low costs. They are a legal mechanism that allows you to put conditions on how and when your assets will be distributed. One of the most common trusts that individuals elect to include in their estate plan is a trust for their children. In most cases, if you die with minor children and without a Will, your children will receive property that they inherit from you when they are 18 years of age. Prior to your children turning 18, the court will have the discretion to appoint an individual to manage the property that your children inherit from you. A trust for your children will allow you to designate a Trustee to manage the trust property and you can dictate the terms and conditions of the distributions of the trust property to your children. For example, in the trust provisions, you could withhold distributions from your children until they reach an age at which you feel they are mature enough to make their own financial decisions. Other trusts that may be included in your estate plan may include a trust to avoid probate proceedings or a trust to reduce your exposure to estate tax.

5. I already have a Will, and it will last my entire life.

Your estate planning needs and laws involving estate planning will change over time, and your current Will and/or trust agreements may no longer achieve your intent for your estate. If the size of your estate has increased since your estate plan was created, your estate plan may be out of date. If your marital status has changed or you have become a parent, a step-parent, or grandparent, you may have different wishes for your assets than your current estate plan dictates. If you have changed your state of residence, the new state’s tax rules may have estate tax consequences for your estate. Therefore, your estate plan should be reviewed periodically to ensure that it meets your present wishes for the distribution of your property following your death, and minimizes any estate tax consequences.

Contact Marshall, Dave, Bob, Keven or Jacob to prepare an estate plan or to review your existing estate plan.

The information provided in this letter is of a general nature and should not be acted upon without prior discussion with your Ohnstad Twichell, P.C., attorney.