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You have worked hard for years, have family members and friends you care about, and have approached a time in your life when “estate planning” sounds like something you should do, but you are not exactly sure why. You may feel that you are not wealthy enough or old enough to need one. Or you may already have a Will and feel that is all that is necessary. Whatever your current thoughts or position, consider these common misconceptions about estate planning:
- Estate planning is for wealthy(ier) people.
Chances are, you have likely accumulated a few possessions that have some monetary or sentimental value. While things like your home, car, and financial accounts are self-evident assets, that collection of superhero figurines, pets or family heirlooms also deserve proper attention. There is no minimum asset value required to justify having a Will, and Littleton Legal can help you get started.
- Estate planning is for old(er) people.
Estate planning is for old(er) people is a common misconception. Tragedy can strike at any moment, and it is important to have your affairs in order to minimize the burden on your loved ones and protect your family’s future. Young parents should ensure that proper guardians are in place to take care of their children if they are no longer around, preventing them from ending up with an irresponsible member of the family or, worse, a complete stranger.
- Estate planning means having a Will.
False. Having a Will is smart because it puts you in charge of the disposition of your assets. A Will allows you to pick your executor, designate the guardians for your minor children, and name any individuals and charitable organizations as beneficiaries of your estate. If you were to die without a Will (i.e., intestate), the law of the state where you reside at your death would govern who receives what part of your estate, who administers your estate, and who takes care of your children. There are some situations where state law may override the provisions in your Will (e.g., a spouse’s elective share), but for the most part, you are in the driver’s seat.
However, a Will is just one tool in the estate planning toolbox. There are other vehicles that allow you to remain in control of your possessions and family’s future during life and upon death. Depending on your situation, a Will alone may not be the most efficient or the most cost-effective means to achieve your goals.
Upon your passing, your Will has to go through probate – a process whereby a court reviews your Will and determines its validity. It is a lengthy and often costly process in many states to begin with and can become even lengthier if a Will is contested (e.g., on the grounds that someone coerced or cajoled their way into an inheritance). The delay in the disposition of your assets and the accompanying legal costs may put your family members in financial straits. If your goal is to ensure that your survivors’ cash flow is uninterrupted after your death, it would be wise to incorporate a trust or a life insurance policy into your estate plan. These assets are considered “non-probate” – they pass outside of your Will and the probate process.
There are other non-probate assets that may constitute a part of your estate. For example, a joint tenancy arrangement on your home, IRA, and payable-on-death (POD) or transfer-on-death (TOD) accounts designate specific beneficiaries upon your death, and the assets pass to them without the delay and cost of the probate process. If your Will provides for a different beneficiary of your IRA account or another non-probate asset, it will be superseded by the beneficiary designation form on file with that account’s or asset’s administrator. Therefore, it is wise to review all of your beneficiary designations periodically, but certainly upon life-altering events like marriage, birth of a child, or divorce.
You are neither too young nor too poor to engage in estate planning! Just remember that a Will may be a necessary, but not the only means to plan your estate in an efficient and cost-effective manner. With Littleton Legal on your side, you can keep on top of your assets, and minimize the burden left to those you care about the most.