Estate planning is regarded as a key life decision because it simplifies inheritance for your heirs after you. From preventing disputes to ensuring that your wealth is distributed according to your wishes, there is a lot that this decision can do for your peace of mind. However, there are several myths and misconceptions that cause confusion about trusts, wills and estate planning as a whole. Let us debunk these myths for you to help you plan your inheritance in a better way.
- It is meant only for the rich
The common belief about estate planning is that you need to have a huge wealth of assets to plan their disbursal. However, even those who are not super-rich should invest in it because it preserves and protects your assets, whatever their value may be. Additionally, it enables you to plan your physical and mental healthcare in case you suffer from them and become incapacitated during very old age. In this way, it helps you take care of your wealth and preserve your basic human dignity as well.
- Young people don’t need it
Life is unpredictable and people do die young. Even if you do not think negative, it is better to be prepared with an estate plan in place at a young age. If you do not have one, the critical decisions related to your assets, such as childcare and management of the assets till they are adults, go in the hands of the state government. Therefore, it is better to have your assets planned whether you are young and expect to live for decades.
- Living trusts are better than wills
Another popular myth that shrouds estate planning is that it is better to have a living trust rather than a will from the tax saving perspective. The truth is that neither can help you to avoid estate tax though you can use either of them to reduce the tax burden. The main reason that people prefer living trusts is that they make transfer of assets to the beneficiaries easier and economical as compared to a will.
- You can draft your own will
This statement is true only to a certain extent. DIY estate planning works only if you have limited assets and uncomplicated circumstances. Situations like second marriages, step children, estranged families, multiple businesses and large estates make it complicated. In such cases, it is better to have professionals handle the will. There are special estate planning software for lawyers that enable them to complete every single aspect of documentation even in the most complex cases.
- Estate plan is needed only once
If you believe that estate planning is a one-time job, you are absolutely mistaken. It is necessary to review the entire documents on a periodic basis otherwise the plan will not accomplish its objective. Situations do change with changing circumstances such as marriage, divorce, acquisition or disposal of assets or birth or death of family members. Accordingly, you will have to get your estate plan tweaked from time to time.
- Adding a child’s name to an asset or bank account is a good idea
You may want to have your child’s name included in the ownership of certain assets or your bank accounts, but this may not be a great idea. This may lead to some potential problems such as the joint owner withdrawing the asset or money from your account even during your lifetime. They may also not share the proceeds with other siblings after your death. So it is better to keep a single ownership on your property and accounts and list them in your will.
- You don’t need an estate plan if everyone gets along well
If your family and children get along well, you may probably think that you don’t need to spend money on estate planning. But this is just a misconception because situations change when people think about inheritance. They may eventually end up getting in huge family feuds for claiming your assets and property. With a written plan in place, you can be sure about mutual harmony and peace in your family.
Now that you know everything about estate planning, you will probably realize the value of investing in it. There is nothing like the right age and right time and you should make it an element of your life planning decisions. After all, it can be a great way to have peace of mind during your lifetime as well as a gift for your heirs after you leave the world.