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Estate Planning Myths, Truths and Realities

Estate Planning Myths, Truths and Realities: Separating fact from fiction.

The greatest mistakes made in the area of estate planning are made as a result of common misunderstandings regarding when an individual should prepare an estate plan and what is required to make that plan responsive to his or her needs. The following is a list of prevailing myths about estate planning and corresponding truths dispelling those myths. You may find after reviewing these myths, truths and realities that you need to consider preparing an estate plan much more than you ever thought.

Myths   Truths

1. If you have a will, your estate does not have to go through probate.

 

1. All assets that pass through your will have to go through probate.

2. You do not need a revocable living trust if your estate is under $11,400,000.

 

2. The $11,400,000 figure (in 2019) is an estate tax exemption, not a probate exemption. There are other reasons to create revocable living trusts.

3. Life insurance is exempt from estate taxes.

 

3. Life insurance is generally subject to estate taxes.

4. A durable general power of attorney can be used after the death of its maker.

 

4. A durable power of attorney is not valid after the death of its maker.

5. If you make up a list of the assets you want to put in your revocable living trust and attach the list to your trust, then those assets are in your trust.

 

5. Each asset you want to put into your revocable living trust must be legally retitled (i.e., new deeds for real estate, new brokerage accounts for securities, and new beneficiary designations for life insurance and retirement accounts).

6. Assets in your revocable living trust are exempt from estate taxes.

 

6. Assets in your revocable living trust are subject to estate taxes.

7. The unlimited marital deduction will protect your estate from estate taxes.

 

7. The unlimited marital deduction will only protect your estate from estate taxes upon the death of the first spouse (assuming the surviving spouse is a U.S. citizen).

8. If you have a revocable living trust, you do not need a will or a durable power of attorney.

 

8. If you have a revocable living trust, you should also have a pour-over will and a durable power of attorney.

9. It takes too much time and trouble to retitle your assets into a revocable living trust.

 

9. Retitling assets into your revocable living trust is typically a simple matter.

10. Your will controls the disposition of all your assets.

 

10. Your will only controls the disposition of assets titled in your name alone (i.e., probate assets). Non-probate assets pass outside your will.

11. If you put your assets into a revocable living trust, your creditors cannot reach them.

 

11. Assets in your revocable living trust are subject to the claims of your creditors.

 

Realities

  1. People don't plan to fail, they just fail to plan.
  2. People spend an entire lifetime accumulating an estate, but spend little if any time preserving the estate from shrinkage due to probate fees and estate taxes.
  3. Probate fees can erode an estate by 5% to 10%.
  4. Estate taxes (federal and state) can significantly erode an estate.
  5. Estate taxes redistribute the wealth in the country.
  6. Avoid do-it-yourself kits. You get what you pay for! Entrust your estate planning to an attorney who specializes in estate matters.

If you have any questions with any of the above information or if we can help you in any way, please contact us.