To many it seems that estate planning is like a mysterious woodland creature. There are sightings, but descriptions of the animal do not all jive, and an accurate picture of the real thing remains illusive.
Dispelling some myths about estate planning is a good start in gaining an accurate understanding of the elusive creature. Once you begin to have an accurate picture, estate planning does not seem so wild and elusive, and you can tame it to provide you peace of mind.
1. Estate planning is just for the wealthy.
Many public discussions of estate planning by attorneys and financial advisers focus on federal estate taxes. With the federal estate tax exclusion amount at $5.34M in 2014, and the Illinois exclusion amount set at $4M, there no wonder that estate planning seems to be something not meant for the common family. If estate planning seems to be only for the wealthy, that is just because professionals focus inordinately on the wealthy. The focus on estate taxes by estate planning professionals is a way for them to demonstrate their experience and knowledge (a/k/a show off), not to mention that they make much more money dealing with complex estate planning, but estate planning is about much more than estate taxes.
The fundamentals of estate planning apply to virtually every adult with assets or income. Estate planning is about making sure that someone you choose will handle your finances if you become incapacitated; that someone you choose will make the decisions about your personal care if you are not able to make personal and health care decisions for yourself; that your estate goes to the people you want to receive it; and that your intentions will be carried out after you pass on from this world. Estate planning is for everyone who has loved ones and any amount of assets that will be left when that time eventually arrives to go to the great beyond.
2. I am too young for estate planning.
I am reminded on a continual basis that there are no guaranties in life. It seems the reminders come all too often and dot the landscape of my life. We do not know when our time will be up on this earth. Few people rise from sleep in the morning or go to bed at night knowing that they have lived their last day in this world. We never know when we might need estate planning; and by then, it will be too late. History is replete with examples of people who died without proper estate planning in place, many at a relatively young age. You can walk into any probate court in the state or country every day and see examples of estates in disarray with loved ones trying to pick up the pieces. Estate planning may even be more important at a young age because the circumstances that take people at a young age are usually not foreseen. If you are an adult with assets and family or friends that are important to you, estate planning is for you.
3. If I pass away without a will, the state will get my assets.
I marvel that people who believe this myth are not compelled to get their estate planning done right away! … but then, see myth one and two above. The good news is that each person essentially has a “default” estate plan. The state laws of “descent and distribution” determine who will get what. The various state laws on descent and distribution are summarized at mystatewill.com if you want to see what your “default estate plan” looks like. If you do not like what you see, then you should get a Will or a Trust drafted and signed that matches your desires and accomplishes you goals for your loved ones left behind. … and to dispel the myth, the State does not get your assets when you pass, except under very unusual circumstances.
4. If I have a will, I don’t have to worry about probate.
The probate animal is, perhaps, the most mysterious of the estate planning creatures. People are often unclear what one is, but they are sure they want to avoid it nevertheless! The truth is that a Will does not avoid probate, plain and simple. If you want to avoid probate, there are other ways to do that, but a Will is not the answer.
A little understanding will put this myth to death. The probate process is a court proceeding designed to handle the administration of an estate in an orderly (but slow and cumbersome) process. A Will (if you have one) makes sure that the process is handled by the person you designate and the assets are distributed to the people you want to have them when it is finished. If there is no Will, the process is directed by the Probate Act (your “default estate plan”). Since a Will is public information, it is contestable in court. Notice must be given to people as required by state law, like heirs and creditors. Anyone with an interest in the estate has a right to intervene. If you own real estate in more than one state, the real estate in different state(s) may also have to be addressed in separate probate cases in each of those states. There are attorneys’ fees, and court costs and other costs involved, and the process in Illinois takes about 9 months to a year on average.
There are various options for avoiding probate, including holding title to property in some form of joint tenancy and having payable on death or beneficiary designations on certain types of property. Estate planning, therefore, involves not only preparing a Will but analyzing how all of one’s property is owned and, perhaps, changing how property is owned to work in harmony with the estate planning documents. For avoiding probate, trusts are by far the best and and most flexible ways of handling an estate.
5. I don’t need a lawyer to prepare a will.
Actually, this is not a myth. It is true. There are self-help websites and guides available to help people draft their own wills and other estate planning documents. If you feel confident in your ability to read and understand the principles of law that apply to estate planning and have the time and inclination to learn, you can draft your own documents. Of course, you can draft your own documents even if you do not know or understand estate planning law, and that, of course, is the danger. Not knowing what you do not know can end up creating quite a mess for your loved ones to clean up.
While many “canned” forms are available to cover most common situations, you need to know which form is the best for you. You may not know about all the options, or how they relate to your situation, and the likelihood of choosing a form that does not really suit your situation is high. You may not be aware when documents are not appropriate for your unique circumstances or when better options are available. Attorneys use forms too. This is nothing new, but no form is used without revisions. Forms are meant to be changed and modified to address individual circumstances. It is better to consult with a reputable attorney who does estate planning then to do it yourself and risk creating more problems for your family and, in the end, not even accomplishing your own goals.
A good attorney should be able to tell you what the cost will be. He or she should give you options to consider and take the time to explain the nuances of estate planning that apply to your specific circumstances so that you can understand how the options apply. A good attorney should help you make informed decisions. You can search for an attorney by asking for referrals from family, friends, and other professionals, by using the lawyer referral service of your local bar association or by using Internet resources like lawyers.com which provide helpful information and rating for attorneys based on peer and client reviews. Finally, don’t forget to ask your employer about discounted legal services plans they may offer.
The estate planning creature is not all that elusive or frightening in the end. The beast is easily captured and tamed. When you have done your estate planning, it will give you peace of mind knowing that you have put your estate in order for your loved ones.
