Estate Planning is a critical component of planning for the future and mitigating stress caused by difficult situations. As an estate planning attorney, I find that there are many misconceptions surrounding estate planning, and those misconceptions often lead to inaction or poor decision-making. Below are some of the most popular misconceptions and information clarifying the realities of estate planning.
1. “I Don’t Need Estate Planning Because I Don’t Have Any Assets”
Many individuals believe that estate planning is only necessary for the wealthy. However, everyone, regardless of their financial status, can benefit from an estate plan. For example, a Last Will and Testament, in addition to providing instructions for the distribution of your property, can also appoint a guardian of any minor children you may have when you pass away. Estate Planning also includes documents which allow you to outline healthcare decisions and name agents in charge of making medical, legal, and financial decisions for you in the event you become incapacitated.
2. “My Spouse Is Automatically Allowed To Act For Me In The Event I Become Incapacitated”
Many individuals believe that their spouse would automatically be able to act for them in the event they become incapacitated. This is, unfortunately, not always the case as situations arise where, if documents are lacking, then the spouse is required to obtain a guardianship or conservatorship over their spouse through the probate court. For example, a young married couple is in the process of selling their home and purchasing the dream home they’ve had their eye on for years. Three days before they are scheduled to close on the property, Husband gets into a terrible car accident and is in ICU for several weeks. Without a durable power of attorney, Wife is unable to sign the deed on Husband’s behalf. As a result, Wife is forced to file an emergency conservatorship petition with the probate court in order to sign the deed and avoid losing the buyer.
3. “My Will Covers Everything Automatically”
A common misconception is that a will automatically governs all assets upon death. This is false because a Will can only control “probate assets.” A probate asset is anything you own in your individual name that does not have a beneficiary designation. Therefore, if you have a joint account with one of your children, but your Will states that same account should be distributed among all of your children, the child named as the joint owner automatically becomes the sole owner upon your passing and the terms in your Will cannot override that joint ownership. Therefore, it’s crucial to ensure that beneficiary designations are up to date and that all aspects of your estate are considered in your planning.
4. “I Can Just Use Online Templates For My Will”
While online templates can seem like a convenient option, they often lack the specificity and customization needed for your unique situation. Massachusetts has specific laws governing wills and trusts, and failing to adhere to these can result in invalid documents. Consulting with an estate planning attorney ensures that your will complies with state law and accurately reflects your wishes.
In addition, Wills have strict formalities when it comes to signing in that you need to sign a Will in the presence of two neutral witnesses and ideally a notary public as well. In a terrible situation, we saw an online Will that was drafted just barely well enough to transfer real estate, but upon inspection we determined that the beneficiary of said real estate was one of the witnesses and thus the provision was invalidated.
5. “Once I Have A Will, I’m Done With Estate Planning”
Many believe that creating a will is a one-time task. However, estate planning is an ongoing process. Life changes—such as marriage, divorce, the birth of children, or significant financial changes—can necessitate updates to your estate plan. It is not uncommon for clients to forget who they named as a beneficiary 5-10 years ago. On occasion, during a meeting to review their prior documents, they become surprised at who they named as a beneficiary those 5-10 years ago and become anxious to update their documents because the documents they created 5-10 years ago simply do not align with their current wishes and intentions. Regularly reviewing and revising your plan ensures it remains aligned with your current circumstances.
6. “Trusts Are Only For The Rich”
Trusts are often misunderstood as instruments reserved for the wealthy. In reality, the benefits of a trust can offer advantages to a range of individuals. For example, parents with young children can often benefit from a trust because they can implement a trust designed to manage assets for their children until they come of age. Another example are families that have loved ones with special needs. A special needs trust can provide for a special needs individual for their lifetime, without disrupting their eligibility for government benefits. Certain Irrevocable Trusts can be a way to shield assets from long term care expenses. Finally, assets owned by or payable to trusts avoid probate which is a slow and public process. Individuals who value privacy may also benefit from a trust.
7. “I’m Not Rich So I Don’t Need To Worry About Estate Taxes”
While most estates fall below the federal estate tax filing threshold of $13.61M, it is much easier for estates to exceed the Massachusetts estate tax filing threshold of $2M. Many clients are surprised to learn that the value of their estate exceeds $2M because they did not realize what is included in their taxable estate. The value of real estate, bank accounts, retirement accounts, investment accounts, and the death benefit of any life insurance policies you own are included as part of your estate for Massachusetts estate tax purposes. Individuals with estates valued over the $2M filing threshold should consider strategies to minimize tax implications. For some families, we can implement an estate plan that significantly lowers or even eliminates their estate tax liability altogether.
8. “My Family Will Just Figure It Out”
Some people assume that their family members will naturally understand their wishes without documentation. This philosophy and lack of estate planning often leads to confusion, disagreements, and expensive litigation among heirs. Clear, legally binding documents are crucial to communicating your intentions and reducing the likelihood of disputes.
Don’t let these frequent myths and misconceptions of estate planning prevent you from exercising control over your future. Consulting with an experienced estate planning attorney can help you navigate these misunderstandings and gain a true understanding of the law, how you may be impacted, and what steps you can take now to help protect yourself and your loved ones.
Herbst Law Group offers complimentary estate planning consultations. Schedule a meeting with an attorney today by contacting our office at 781-843-5034.