Estate planning is the process of anticipating and making arrangement for the management and distribution of assets in the event that the individual dies or becomes incapacitated during their life. It is estimated that over half of adults that live in the United States do not have an updated estate plan. Therefore, for over half of adult Americans, when they pass away, the assets in their estate fall subject to the default distribution set by law that exists in their state at the time of their death. For many, the default distribution laws, otherwise known as intestate laws, do not efficiently transfer assets to the persons or organizations according to their true wishes. The intestate distribution process through probate court can also be very untimely and costly. The only way to avoid intestate laws and a probate administration is to establish an estate plan. Every adult in the United States should create an estate plan and maintain that estate plan over the course of their lifetime so that their assets get to where they wish for them to go. However, there are some common misconceptions about estate planning that prevent individuals from moving forward in creating an estate plan. This article serves to address and debunk the first three of the most common estate planning myths.
1. Estate planning is for wealthy people.
Every single person, no matter the amount of wealth they have acquired during their lifetime, have something in common for estate planning purposes - every asset or piece of personal property they own will be subject to a probate administration and intestate laws at their death unless action is taken. While the recommended type of estate plan will differ depending on several factors, one being the value of an individual’s assets, every adult in the United States must take affirmative estate planning action to keep assets out of a probate administration and control who receives their assets. This is true for an individual with $100 or $100 million in their bank account.
2. Estate planning is for people of a certain age.
This statement is both a truth and a myth. It is true that a person does not have the capacity to execute estate planning documents until they reach the age of majority (often 18 years old). On the other hand, estate planning is not just for individuals who are of an advanced age, which is the common misconception here. The estate planning needs of an individual in their 30’s will differ from an individual in their 60’s, but the need for an estate plan is still present. Both individuals have the opportunity to prepare for their incapacity during life and the transfer of their assets upon their death. As much as it is difficult to think about, individuals in both age groups could get hit by the beer truck tomorrow. If that happens, unless they utilize an estate plan, there is no affirmative plan in place and default laws apply, which often does not reflect the individual’s wishes and requires the filing of a case in probate court.
3. Estate plans are permanent or can’t be changed.
Unless any portion of your estate plan in irrevocable, each and every piece of it can be changed or revoked at any time you wish so long as you maintain the capacity to execute estate planning documents. Due to the permanent nature of an irrevocable action, Rosenacker Law Office takes the time to not only emphasize that your action cannot be changed down the road, but to ensure that you have full knowledge of the consequences of your action. Please note though that irrevocable actions in estate planning are rare and completely optional.
Stay tuned for Part II as we set the record straight on more estate planning myths.