What is one of the most appreciated things you can leave your loved ones when you pass? Your vintage car? The business? Heirloom jewelry? No, it’s instructions.
Estate planning allows you to set clear directions on what should happen when you pass. During the estate planning process you get to make the important decisions, leaving nothing for your heirs or the courts to wonder about or argue over. A good estate plan makes it easier and less costly to distribute your assets after you’re gone.
8 Common Misconceptions About Estate Planning:
Many people are confused about the need for an estate plan. Test yourself on these true or false statements:
- Only older people need an estate plan
False. Everyone needs an estate plan, regardless of age.
- Estate plans are only for wealthy people
False. An estate plan covers more than financial assets.
- I don’t need an estate plan because when I pass, everything automatically goes to my spouse
False. Not necessarily. If you pass with no will, it’s called ‘intestate,’ and state law will determine how your assets are divided.
- If I pass, my child’s godparents will automatically get custody
False. An estate plan allows you to name a guardian for your child, along with a conservator, who will manage assets the child will inherit.
- Estate plans only cover money
False. An estate plan can include medical directives, funeral plans, and other details.
- My will has the final say on how my assets will be divided
False. The beneficiaries listed on your retirement accounts, life insurance policies and other accounts will rule over anything stated in your will.
- An estate plan is the same thing as a will
False. A will is one part of an estate plan; the will is really focused on who gets what after someone passes.
- I don’t need an estate plan because the courts will divide my assets for free
False. The cost of probate, when a court pays your debts and then divides your property, can take up to 10% of the value of your estate.
What can you include in an estate plan?
An estate plan covers more than financial assets. Here are some of the most common things included in estate plans:
This includes everything you own, including vehicles; your home or other real estate; life and other insurance; jewelry, antiques, or other valuables; savings and checking accounts; stocks, bonds, pensions, and mutual funds; retirement savings; business holdings; and anything else.
This is your total debt, including your mortgage, credit card balances, auto, and other loans.
These are the people, charitable organizations, or others that you want to receive your assets after you pass.
Allows you to designate who should get what when you’re gone. A will also allows you to choose the person (called the executor) who will settle your affairs for you.
- Medical Directive/Living Will
Tells people what type of medical care you want if you are unable to make the decision yourself.
- Medical Power of Attorney
Allows someone else to make medical decisions on your behalf.
- Durable Financial Power of Attorney
Enables someone else to make financial decisions on your behalf.
- Living Trust
Allows you to grant part of your estate before you pass. Property left within a trust will not go through probate court.
- Funeral and Burial Plans
Helps your family make decisions during a difficult time.
- Business Succession Plan
Avoids uncertainty by setting a plan that details exactly what should happen to your business.