Thy Will be Done: Deconstructing Estate Planning Myths

By: Skjold-Barthel

Estate Planning. To many people, the thought of “estate planning” represents uncertainty, fear and even death. “Planning your estate” rather, is simply about caring for loved ones, seeing that they are provided for, and ensuring that hard-earned savings are distributed according to one’s wishes.

An estate consists of all the assets one acquires during life, including:

• A home and any other real estate (including time shares and inherited property that may be owned jointly)
• Tangible personal property such as vehicles, furniture and family heirlooms
• Intangible property such as life insurance, bank accounts, mutual funds, stocks, bonds, business investments and pension and social security benefits

A properly-drafted estate plan creates a blueprint for property distribution upon death.

Common Myths Associated with Estate Planning

If I die without a written estate plan (such as a will or trust), my family or the state will distribute my estate according to my wishes.

By not leaving a valid will or trust, or transferring property via an alternate method (for example, through joint ownership), state law determines how property is distributed. This means that the probate court will make certain assumptions about asset distribution – assumptions with which one does not agree. Generally, these assumptions pass property to individuals most closely related by blood, even if little or no relationship was maintained during life and even to those who have less of a financial need than others. Only focused estate planning gives one control and security during life knowing loved ones are provided for as desired.

If I have a will, my heirs will not have to worry about probate.

In fact, the opposite is true. A properly-executed will does go through probate. However, the advantage of having a will in a probate proceeding versus not having a will is like traveling to a new destination without a map. Generally, a will expedites the process of probate so that intended beneficiaries and heirs have quicker access to property designated to them.

Avoiding probate or establishing a trust will avoid estate taxes.

For individuals and couples with substantial assets – at least $500,000 to $750,000 – avoiding estate taxes can be a difficult predicament. Merely establishing a trust, in most instances, will not accomplish this objective. Focused estate planning, including joint ownership of property and investing in tax-friendly instruments, can help ease the potential tax burden. Likewise, certain types of trusts for larger estates may be able to provide a safe-harbor to reduce estate taxes and ensure that loved ones and charitable causes receive a greater portion of the estate.

Estate planning is just for older people.

This statement would be true if everyone knew the moment they would die. However, experience demonstrates that many young and middle age people die suddenly, often leaving behind minor children who need care and direction. Estate planning is more than just directing where property is to go upon death. It encompasses the manner in which personal affairs are to be conducted including organ or tissue donation, funeral and burial arrangements and establishing guardianship provisions for minor children.

If I tell my family members that I do not want to be kept alive artificially, my physician has authority to withdraw life support.

If the Terry Schiavo case taught us anything, even how we define “family member” can be widely debated. In this era where blended families are becoming more common than ever, it really is up to the individual to determine when and how they would prefer to die or be cared for if faced with that decision. Living Wills and Health Care Directives as part of an estate planning package provide a solution to making one’s wishes known and appointing a successor health care agent to make those difficult life and health care decisions.

For most people, estate planning is one of the most important decisions to make during life. A well-crafted estate plan can provide peace-of-mind – knowing that affairs will be in order for loved ones and the next generation.