There are a lot of misconceptions floating around in the area of life and estate planning, and they can have a devastating impact on your loved ones. But planning ahead the right way can secure your legacy for your family during a difficult time. Here as the five biggest and most common misconceptions.
1. Wills Don’t Control Everything
Many people assume that a Last Will and Testament is the preeminent document overseeing everything, and that what the Will says has the force of law. Unfortunately, that is not true, and many people mistakenly think that a Will is a complete plan.
If a person gets remarried and executes a Will naming their new spouse as beneficiary, it does not change life insurance policies, retirement accounts, or other beneficiary designations. Many extremely unhappy second spouses lost hundreds of thousands of dollars in life insurance and accounts to the first spouse because the policies and accounts were never changed. A Will can be an important part of a life and estate plan, but it is not by itself a plan.
2. Wills Do Not Avoid Probate
Many people mistakenly believe a Last Will and Testament acts like an “all-access pass” to transfer assets after death and their estate avoids probate. They assume their executor can take the Will to the bank and start withdrawing money. Definitely untrue. A Will instructs the probate court how to distribute assets AFTER the probate court procedures are followed.
Many consider probate an expensive, time-consuming, frustrating process that gets in the way of family inheritance rather than help the family. Unfortunately, this is true of many estates and people try to avoid probate for their loved ones, including through use of a revocable trust.
3. Lawyers make A LOT of Money When People “Do It Themselves”
Ever wonder why there is no big outcry from attorneys about LegalZoom® or other online or computer generated legal documents? It’s because they are easy for non-attorneys to mess up, and then attorneys end up litigating “what the person actually meant” in a court of law. Suddenly the documents to avoid problems end up becoming a huge financial boom for estate litigation attorneys.
Our firm reviewed hundreds of estate plans, and without fail do-it-yourself documents never say what was intended, and a third of the time are not signed correctly making the plan worthless. Like everything in life, you get what you pay for, and planning right can save hundreds of thousands of dollars in legal fees, months of delays, and unfathomable aggravation.
4. Unless You Say Otherwise, Beneficiaries Inherit at Age Eighteen
People are often shocked to find their estate plan does not line up with their accounts and insurance. Even if a person had the correct beneficiaries listed on their accounts, they are puzzled to that age restrictions placed in their Wills mean nothing. Most believe 25, 30 or later are appropriate ages for inheritance, and those limits are in their Will or Trust. Insurance conveys large sums of money quickly while avoiding probate, but if a child is a direct beneficiary, the insurance company is legally obligated to give the funds to the child if they are 18.
It’s not right. It was not intended. But that’s how it is. Insurance, bank accounts, and stock accounts are based on contracts. If the contract states a beneficiary receives the insurance/money/stock at 18, then it does not matter what was in the Will.
5. Many Attorneys Know a Lot Less Than They Think About Estate Planning
More and more, the attorneys specialize the way doctors have, and life and estate planning can not be adequately addressed by “general practitioners.” But unlike medicine, there is a good chance that a mistake will not be found until the person is deceased or incapacitated. And then it is too late. Fortunately, there are ways to screen an attorney for experience and skill to help you put together an effective life and estate plan.
There are many minefields and pitfalls to avoid in an effective life and estate plan, and our firm is experienced in helping our clients reach their goals. There are different techniques, documents, and methods of putting together a life and estate plan, but here are what we call “The Big Five” documents:
- A Revocable Living Trust
- A General Durable Power of Attorney
- A Healthcare Power of Attorney
- A Living Will
- A Pour Over Will
The documents work together to cover most main goals and form the foundation of a solid life and estate plan. While there is a lot of misinformation on life and estate planning, we can help you achieve your legal planning goals and help protect your family during already difficult times. To set up a complimentary consultation or attend a free seminar, call 919-844-7993. There is nothing to lose and everything for your family to gain.