Post by Compass Wealth Partners
There are people who stay away from estate planning as much as possible. However, it is a must to have a good understanding of this process. The best way to get started here is to debunk first the most common but possibly damaging myths about estate planning.
1st Myth: You Don’t Need an Estate Plan If Your Estate is Small
There is no need to have a small fortune for heirs to make the most out of estate planning. For example, what will you do if you choose to divide all your assets among some beneficiaries instead of just designating your spouse or someone else? This is critical if you are in second or third marriage, with children from the previous marriage. Also, you might also want to leave some estate to charity. If you want to help the members of your family avoid probate delays, reduce your estate taxes, and identify who will manage your estate, estate planning is a must.
2nd Myth: If Your Will Covers Everything, Estate Planning is No Longer Necessary
While your will is a great starting place for your estate plan, chances are it is not really enough by itself. There could be several loose ends that need tying up. Also, depending on the laws in your area, your heights may have to undergo a lengthy process of probate that could draw out more if you have properties in different places. A revocable living trust will help you in passing some assets to heirs with no probate. It is also possible that a durable power of attorney will accompany your will that will authorize a professional or family member to act in your behalf if you are incapacitated.
3rd Myth: An Estate Plan is Not Needed If Everything Will Go to Your Spouse
This has a close relation to the first myth. Leaving everything to a spouse under a will doesn’t mean that estate planning will not benefit you. What if your spouse suddenly dies at an early age or the two of you die together because of an accident? What will happen? There could be complications on how assets have been titled, who have been named as beneficiaries of your retirement plans and life insurance policies, or the estate laws in your area.
4th Myth: You Don’t Have to Worry about Retirement and Life Insurance Plan Designations
This overstates the case. Even though the beneficiary designations you have made for retirement and life insurance plans are a great start, you still have to coordinate these choices with other areas of your estate plan. There might be a need to alter your designations, such as when your spouse dies or you get a divorce, or you might have to add contingent or secondary beneficiaries. Life insurance proceeds are also included in the insured’s taxable state although in general, the proceeds will not be included in you transfer policy ownership to a trust or someone else.