For many people, estate planning is not at the top of the list of things they’re excited about. It can be easy to convince ourselves that estate planning isn’t important at the moment or doesn’t need to be done at all. While 95% of people want their assets to transfer to a chosen person upon their passing, many don’t go through the process of making an estate plan. If that’s the case for you, here are 5 common myths people have about estate planning and why they need to be busted.
Myth #1 What is Estate Planning
Studies have shown that roughly 7% of Americans don’t even know what an estate plan is. While this isn’t technically a myth, it’s still important to explain what the purpose and point of an estate plan is. According to Forbes, “Estate planning is the process of legally structuring the future disposition of current and projected assets.” In laymen’s terms, estate planning is making a legal plan for how your assets are to be divided and dispersed after your death. If you die without estate planning in place, a court will assume the role of allocating your estate. The final outcome of the court’s dispensation of your assets will depend on the intestacy laws in your state. Now that we have that groundwork laid, let’s move on to myth #2.
Myth #2 My Spouse/Children Will Inherit
You may hold the assumption that your spouse or children will inherit your assets after you pass away if there isn’t a Will or Trust in place. In fact, 13% of those without an estate plan believe that is true. While there is a chance that they will eventually receive your assets, the court may not split your estate between your family the way that you would prefer. In addition, if you wanted to donate a portion of your estate to your church or favorite charity, you need an estate plan to make that happen. It’s better to make your wishes known now so the court doesn’t have to guess later.
Myth #3 It’s Too Expensive
This is an important myth but a relatively easy one to bust. Take this example: if you have a $400,000 estate (includes car, home, and savings), the probate – depending upon the state you live in, could be up to $20,000! Not to mention the time that the probate process takes, you could save your heirs thousands by having an estate plan in place! It’s also important to note that heirs fighting for assets may also increase the probate costs. You may be paying for an estate plan now, but it is an investment that will save your family in the long run.
Myth #4 Not Enough Assets
Many assume that the only reason they would need to use estate planning as a financial tool is to limit or avoid paying estate taxes. For those households that do not have large estates, many believe that an estate plan can be ignored. In fact, 17% claim they don’t have enough assets for an estate plan. The reality is that the importance of an estate plan is nearly universal. By creating an estate plan, you will be dictating how your assets are transferred after you have passed away. It doesn’t matter how many assets are in your estate; if you have something to pass on after your death, an estate plan is essential to benefit both you and your heirs.
Myth #5 I’ll Do it Later
It’s easy to procrastinate and say to yourself, “I don’t need to take care of estate planning now, I’ve got time.” The truth is that you can never plan for a death in the family, least of all your own. One vitally important reason to take care of this now is the guardianship of your children. 75% of American families with minors will leave guardianship to the court. That is a staggering number. When it comes down to it, we would do anything for our kids. It is our responsibility to take care of our estate planning now so that we have a say in what would happen to our kids if both parents were to pass away. Don’t delay. Start working on your estate plan today.