Estate planning is something that is often misunderstood and overlooked by many families.
Contrary to popular belief, it's not just a concern for the wealthy. In this article, we'll discuss some of the most common estate planning myths to help you with this mysterious process.
Only the wealthy need estate planning — perhaps the most popular misconception on the list. While it is true that a federal estate tax isn’t applicable until your estate tops $12.92M in value, that doesn’t mean you won’t have to pay taxes if it’s less than that. Estate planning isn't just how you'll distribute your assets, it also gives direction and instructions in case of your passing or incapacitation.
“You don’t need to worry about it yet, you’re too young” is a commonly held idea that can create a lot of problems in the event an estate plan is unexpectedly needed. Although it’s unlikely, there are countless stories of disaster scenarios in which something tragic happened unexpectedly and left a family in disarray.
Without a will, the state gets your assets: Far, far from true. Over half of Americans don’t have a will, and although it’s not ideal, it’s not a “lose it all” situation either. If you pass without a will, your state will put your estate through its "laws of intestacy" to determine who gets what.
A will allows you to avoid probate: Again, false. Probate is a necessary legal process that most aspects of an estate must go through, the will just provides official documentation of your wishes. Some aspects of an estate can still avoid probate though if done properly — i.e., life insurance, annuities, 401(k)s, and more with designated beneficiaries, and other assets like vehicles and real estate with a “transfer on death” registration.
Estate planning is a critical component of financial management that everyone should consider, regardless of their wealth. By dispelling these common myths, you can approach estate planning with a clearer understanding, ensuring your affairs are in order for the future. When it comes to real estate, investing in your future is key and being prepared for life events can make all the difference.