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480.240.4020 Laying Estate Planning Myths to Rest
One of the best things about being an estate planning attorney is that people generally get what I do, and they’re curious about it. It makes for interesting cocktail party conversation, and gives me an opportunity to share my knowledge and hopefully help people understand this important topic. When I talk to people about estate planning, I often find myself clearing up some common myths and misconceptions. These myths can lead to big mistakes, unnecessary expenses, and headaches for your loved ones down the road. The following are some of the top myths about estate planning.
Myth #1: My life is simple; I don’t need an estate plan.
Many people believe that only the very wealthy need an estate plan. After all, you can currently pass almost $14 million at death, free of estate tax. Most people fall under that limit. However, there are plenty of good reasons to have an estate plan that do not have to do with estate tax. For example, a well-structured estate plan can avoid the need for probate (the legal process for managing and distributing an estate), saving your surviving loved ones time, effort, and money.
We also tend to underestimate how complicated our lives really are. We learn to navigate the details of our lives until the complex turns into the ordinary. However, those details can make matters complicated when you die. For example, if you have a child or other loved one with special needs, leaving that person a sum of money could prove disastrous if the person loses the ability to qualify for Medicaid or other forms of public assistance. Maybe you are a small business owner, you have a blended family (i.e., you and your spouse have kids from prior relationships), or you own a vacation home in another state. Those are just a few factors that could make it somewhat complicated to handle your estate. A good estate planning attorney can ask the right questions to identify the areas of your life where some lifetime planning can help simplify matters when you die.
Myth #2: I have a Will, so my family won’t have to go through probate.
Having a Will can ensure that your wishes are followed after your death. If you do not have a Will, the state laws will decide how your property is distributed; some attorneys are fond of saying that if you don’t write a Will, the state will write one for you. It is worth noting that property with a designated beneficiary, such as a life insurance policy or 401(k), or property owned “with rights of survivorship” may avoid probate if the intended beneficiary or co-owner outlives you. However, these forms of designation or ownership are highly dependent on everyone dying in the “right” order, and are not fail-safe.
However, having a Will does not prevent your family from having to go through a legal process called “probate” in order to administer and distribute your estate.
The good news is, with careful planning, an estate planning attorney can help you come up with a plan that executes your wishes about what happens to your property, and avoids probate. Often, this is done through a mechanism known as a revocable trust (sometimes called a “living trust”). As the name implies, this trust can be revoked or changed by you during your life, just like a Will. There are some nuances involved in setting up the revocable trust and making sure it is funded, meaning your property is placed in the trust. However, your estate planning attorney can help to guide you through the process, and the result can be a much easier and efficient process for your family when you die.
Myth #3: My Revocable (Living) Trust Protects me from Creditors.
As mentioned above, revocable trusts are a great way to simplify things for your family when you die, by avoiding probate. For that reason, many estate planning attorneys recommend revocable trusts to their clients on a regular basis. However, having a revocable trust does not protect you from creditors during your lifetime. Why? One of the things that makes a revocable trust so appealing is that the grantor (the person who creates the trust) continues to have complete control over the property in the trust. In general, if you control property for your own benefit, the law allows your creditors to get to it.
Fortunately, the need for creditor protection also can be overblown. It is true that almost anyone could find themselves facing a lawsuit due to an unfortunate event such as a car accident. However, for many people, the risk is relatively minimal, and often can be mitigated through insurance. For those in professions or industries that have a heightened risk for liability, your attorney can advise you of other potential methods for providing some additional creditor protection.
Myth #4: My kids are responsible – I don’t need a trust for them
You might trust your kids completely—and still want to leave their inheritance in trust.
Why? Life happens. Divorce is common. A trust can help protect your child’s inheritance from a divorcing spouse, creditors, or other unforeseen problems. Unlike a trust that you create for yourself (see Myth #3), a trust that you create for someone else – like your kids – can help protect against creditors.
A trust can also help with responsible investing, prevent wasteful spending, and preserve benefits like Medicaid eligibility for children with special needs.
Leaving assets “in trust” isn’t a sign of distrust—it’s a gift of protection and peace of mind.
Myth #5: Estate planning is all about planning for death.
It is true that estate planning deals with what happens when you’re gone. However, in addition to (and maybe even as important as) planning for death, a good estate plan puts in place a plan to help manage your property and your health during your life, in the event that you are not able to act for yourself. Documents like a Durable Power of Attorney (for finances) and a Health Care Power of Attorney (for medical decisions) are critical. They allow someone you trust to manage your affairs if you’re incapacitated due to an accident or illness, or even as you age and need help managing your finances and your health care.
Myth #6: I can draft my own estate plan.
Technically? Sure—you can draft your own Will or Power of Attorney.
But just because you can, doesn’t mean you should.
Even a small mistake (like missing a witness signature or using unclear language) can lead to enormous problems down the road. Stories abound of DIY Wills that caused family fights, disinherited loved ones, or ended up costing more in court battles than a properly drafted plan would have cost to begin with.
Estate planning attorneys do more than fill in forms—they ask the right questions, spot hidden issues, and help create a plan you can trust.
Estate planning is not just about protecting money—it’s about protecting people. It’s about making things a little easier for the people you love when you’re gone.
Don’t let myths or misinformation stand in the way of creating a plan that gives you (and your family) real peace of mind. With the right guidance, estate planning doesn’t have to be complicated—it can be one of the most empowering things you do.
