There are a number of common misconceptions I hear when people talk about estate planning. These are five of the common fallacies I regularly hear in having conversations about estate planning, and these are the things that you should challenge in thinking about your own estate planning.
1. Estate Planning Is For Rich People
A very common mistake people make is to believe that estate planning is only for the wealthy. Quite the opposite! Some of the most important estate planning is planning for guardianship of minor children, which must be done by young families that are early in their career and earning potential. High net worth families will have more complicated estate planning, often including custom tax planning. But estate planning, more broadly, is about protecting our estate and family in the event of incapacity or death.
2. All I Need Is A Will
I am always appalled when someone tells me that they've done their estate plan by signing a Will. True, a Will is a part of any decent estate plan. However, a Will by itself is NOT enough. A Will only is admitted to probate after someone has died. What if the grantor becomes incapacitated? What if the grantor needs someone to make end-of-life medical decisions? Without the appropriate Durable Power of Attorney and Health Care Directives in place, the family might end up in a guardianship petition subject to court oversight and extensive legal fees during an incapacity.
3. A Will Avoids Probate
I hear this less often than I used to, but I often still hear people claim that a Will avoids probate. NO! QUITE THE OPPOSITE! The word “probate” comes from the latin word “probare,” meaning “to test or prove.” Probate was established as the judicial process of proving a deceased individual's wishes. A Will is a one-way ticket into probate court. Nevada Revised Statutes section 136.050 requires that a Will must be delivered to the district court within 30 days after knowledge of the person who executed the Will. There are certainly ways to avoid probate, but signing a Will is not one of them.
4. You Need At Least $1,000,000 To Set Up A Trust
There are some attorneys out there who will tell you that you shouldn't have a Living Trust unless your estate is worth $1 million or more. I disagree (and my guess is that those lawyers often take probate cases!). A Living Trust can be a vital tool in avoiding the unnecessary time, cost, and effort in a probate proceeding, whether your estate is worth $100,000 or $100,000,000. A Living Trust can be set up to protect an inheritance to your beneficiaries from divorce, spendthrift habits, and drug and alcohol abuse. A Living Trust is almost necessary if a beneficiary is on a government needs-based benefit program, such as Medicaid or Medical, in order to avoid the beneficiary losing their benefits. And even if those are not concerns for your estate, the administration of a Trust can be done privately without a public record; whereas probate is an open legal process accessible by anyone. There is no minimum value you can put on creating a trust, as many of the benefits above are priceless to some people.
5. I Set Up My Trust Years Ago, So I Don't Need To Worry About It
Everyone knows the common adage. “There are only two guarantees in life: death and taxes.” Truth is, there is a third guarantee: CHANGE. Whether you set up your trust 5 years ago, 15 years ago, or 30 years ago, I can all but guarantee you that things have changed since then. Family relationships are strengthened and torn. Financial wealth increases and decreases. People are born and people die. People move. And most importantly, laws change. If you set up a trust before 2011, we have seen MULTIPLE changes to the estate tax since then that could drastically change the approach in dealing with your trust. Estate planning is the culmination of your legacy, and although it may have been current for a while, it is always a good idea to review the plan to account for those things that have changed over the years.
If you have ever made any of these statements, I hate to be the first one to tell you that you have been misinformed. As a Nevada estate planning attorney, I want to educate people to emphasize the importance of protecting your legacy. Call or text me to schedule a free consultation or review of your current estate plan today at (775) 954-6006.