Estate planning is a crucial aspect of managing your assets and ensuring your loved ones are protected in the event of your passing. Unfortunately, there are several prevalent myths surrounding estate planning that can lead individuals down the wrong path. Here are five myths and common misconceptions about estate planning.
Myth 1: Wills and Trusts Serve the Same Purpose
It is a common misconception that Wills and Trusts are interchangeable estate planning tools. In reality, they serve different purposes but complement each other. A Last Will and Testament is a legal document that outlines your final wishes by designating recipients for your probate assets and appointing a Personal Representative to administer your estate by paying estate expenses and distributing your probate assets according to the wishes outlined in your Will. However, a Will only controls your probate assets, those which you own in your individual name without a joint owner or beneficiary. Those assets must go through probate, a time-consuming and costly legal process, before assets are distributed.
On the other hand, Trusts can do everything a Will can do and bypass probate, allowing for a quicker and more private distribution of assets. They are also useful for managing assets during incapacity, preventing court interference, protecting assets and providing ongoing asset management and support for beneficiaries. Trusts come in various forms, such as revocable living trusts and irrevocable trusts, each designed to meet your specific needs.
Myth 2: One Size Fits All – Everyone Has the Same Estate Plan
Your estate plan may be very different from your next-door neighbor’s estate plan. This is because your estate plan should be prepared based on your specific assets, goals and needs, and the sometimes unique situations of your loved ones who will receive your estate assets, such as special needs, substance abuse or a potential divorce on the horizon. While there are basic estate plan documents everyone should have in place, including a Will, Power of Attorney and Health Care Proxy, your estate plan may be much more complex if you, for example, own a business and/or wish to reduce the estate taxes due to the Commonwealth after your death. Luckily, there a variety of estate plan documents available to meet the unique estate planning needs of everyone.
Myth 3: Only Have a House and Retirement Accounts? No Need for Estate Planning
Some individuals believe that estate planning is only necessary if they own substantial assets or have a complex financial portfolio. However, estate planning is essential for everyone, regardless of their net worth. Even if you only own a house and have retirement accounts, proper planning can ensure that these assets are transferred smoothly to your intended beneficiaries and that your wishes are honored, perhaps with an appropriate Trust. Estate planning should be comprehensive – I regularly discuss with clients the importance of confirming they have primary and contingent beneficiaries designated on retirement accounts and life insurance policies in accordance with their overall distribution wishes, along with the dangers of not having beneficiaries designated (hint: probate is necessary).
Myth 4: Verbal Instructions Are Enough
It is a dangerous misconception to believe that verbal instructions or promises made to family members or friends are sufficient for estate planning purposes. Verbal instructions hold no legal weight, and they may lead to confusion, disagreements, and legal challenges after your passing. Without proper written documentation, your wishes may not be honored, and the distribution of your assets may not align with what you intended.
To ensure that your estate plan is legally valid and enforceable, it is crucial to work with an experienced estate planning attorney to formalize your wishes in legally recognized documents like Wills and Trusts. This approach provides clarity and protection for your beneficiaries.
Myth 5: Preparing Estate Plan Documents Online Is A Safe and Effective Option
While online tools and templates for estate planning documents may seem like a convenient and cost-effective option, they can be risky and ineffective. A colleague of mine considers them job security because of the numerous times his legal services have been engaged to correct poorly drafted documents that fail to include state-specific nuances or necessary provisions that resulted in unintended outcomes.
An experienced estate planning attorney can provide invaluable guidance, ensuring that your documents are correctly drafted, conform with state laws, and reflect your true intentions. They can also help you adapt your estate plan over time, considering changes in your life, the lives of your loved ones, your finances, or the laws.
Do not fall prey to these myths and misconceptions! Your situation is likely unique and deserves to be approached with care and attention to detail. At Samuel, Sayward & Baler LLC, we believe estate planning is a critically important process and we take the time to create a personal, comprehensive plan that protects your loved ones and preserves your legacy.
Attorney Abigail V. Poole is a senior associate attorney with the Dedham firm of Samuel, Sayward & Baler LLC which focuses on advising its clients in the areas of estate planning, estate settlement and elder law matters. She is an active member and President of the Massachusetts Chapter of the National Academy of Elder Law Attorneys (NAELA). This article is not intended to provide legal advice or create or imply an attorney-client relationship. No information contained herein is a substitute for a personal consultation with an attorney. For more information visit www.ssbllc.com or call 781/461-1020.
August 2023 © 2023 Samuel, Sayward & Baler LLC