Clearing Up Common Estate Planning Misconceptions

Television, movies, books, friends, family, the news media, and the internet are full of information regarding Estate Planning. However, each person’s planning situation is unique, so reliance on a one size fits all approach or the following misconceptions could lead to an unintended result.

1. Having a Will automatically avoids Probate

No. Actually, a Will is often relevant only if probate becomes necessary. Probate is still required if you have assets in your sole name without proper beneficiary designations.

2. Estate planning is just for the elderly

No. Young parents with minor children need a Will to clarify who should act as guardian for their child(ren). Parents of older children may want to clarify where, when and how their assets are distributed or used. And, people of all ages need to plan for incapacity, make end-of-life health care choices, and ensure that, at death, their assets will go to the beneficiaries of their choosing.

3. I am married so everything will pass to my spouse

A spouse does not automatically inherit your assets in every situation. If you have children from a prior relationship, a portion of your assets may pass to them. Assets may also be subject to claims made by creditors.

4. If I become incapacitated, my personal representative can handle my financial affairs

Your personal representative does not get appointed until after you die. If you become incapacitated, only your appointed attorney-in-fact (under a Power of Attorney) or your Successor Trustee (under a Trust) may act on your behalf.

5. Estate planning is just for the wealthy

No. While higher estate tax exemptions have made estate tax planning more applicable for the wealthy, estate planning is not solely about estate tax avoidance. Regardless of your wealth, you should plan for: incapacity; wishes for end-of-life; avoiding the expense of probate; and ensuring assets go to the people and charities you wish.

6. I need to have a Trust in order to avoid probate

A trust is one of several strategies to avoid probate. Assets that have beneficiary designations or that are jointly owned avoid probate, but trusts sometimes allow for more flexibility and control of assets.

7. Having a trust will avoid estate taxes

Having certain types of trusts can help minimize estate taxes, but it does not automatically avoid them. Careful planning needs to be done if your assets exceed the estate tax exemption. (Minnesota 2020 - $3.0 Million; Federal 2020- $11.58 Million)

8. I should put a joint owner on my real estate to avoid probate

It’s not that simple. There are potential income and gift tax consequences for adding joint owners on to property. Additionally, it could complicate your eligibility for medical assistance.

There are many considerations and nuances to Estate Planning with potentially disastrous results if done incorrectly. An Estate Planning attorney is key to explain your options and help you implement specific strategies for your estate.

Questions About This Topic?

Contact us today if you have questions about this topic or if we can assist you with your Estate Planning needs. Fill out the form below, or call our Stillwater, MN office at 651-439-2878 or Hudson, WI office at 715-386-3733.

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