Lillian Turner-Bowman Confronts 3 More Estate Planning Myths That Might Surprise You

2015-12-07_Pers_BlogAs is my habit, this post is being composed on Monday … and today happens to be good ol’ Cyber Monday.

I say “good ol” because, well, the days are long gone when the actual rationale behind it was true: remember — everyone had dial-up at home, and Monday was the first day after the holiday weekend that most people had access to broadband (which came through those copper T1 connections at many workplaces). So (presumably while the boss wasn’t looking), happy employees everywhere caught up on their holiday shopping with the “lightning” speeds available of about 2 mbps.

And thus, “Cyber Monday” was born.

Now, well … most cell phone signals are exponentially faster than those days of yore, and it’s all pretty much just an excuse for a big sale. And we have Small Business Saturday and Giving Tuesday thrown into the mix.

Hopefully someone will soon get “Sleep-It-Off Sunday” the attention it righteously deserves!

But I’m here today to talk about some bad reasons.

Specifically, as it relates to planning for your family’s future — because while the traditional estate tax threshold has been raised quite high in recent years, estate planning is *much* more than just avoiding the “estate tax”.

In fact, the majority of our clients don’t (yet) find themselves within the wealth category affected by the estate tax threshold being raised.

But that does NOT mean that planning for “what’s next” isn’t important. And yet, too many people hold onto faulty thinking in order to justify their procrastination.

Here’s a little more of what I mean…

Lillian Turner-Bowman Confronts 3 More Estate Planning Myths That Might Surprise You
“Every action of our lives touches on some chord that will vibrate in eternity.” – Sean O’Casey

A couple weeks ago, and before our collective turkey-induced comas, I wrote about these common myths still held by the majority of Americans.

In fact, as of this writing, it’s a fact that almost 60% of Americans don’t have a basic will, and that’s a big problem.

Much of the reason for this is because they mistakenly believe these common estate planning myths, and I dealt with two already:

Myth 1. Only rich people prepare estate plans.
Myth 2. Everything goes to your spouse, if something happens.

Well, I’ve got three more for you to chew on, and dispense with.

Myth 3. After I create my will or living trust, there’s nothing else to think about.
Well, if you follow this line of thinking, it could lead to a lot of problems. For instance, once you set up a trust, you need to re-title the assets you want to transfer to the trust. Otherwise, the trust doesn’t help a thing.

On top of that, families need to periodically update their will or trust to reflect major life events, such as a divorce or the birth of a child. You’ll also want to revisit your estate plan if you move to another state.

In fact, it’s a good idea to re-evaluate your plan every 3 or 4 years to make sure your plan is fully up-to-date.

Myth 4. If I have a will, my estate automatically won’t go through probate.
Well, again — that’s not the case. In fact, ALL wills are subject to “probate”. This is a process in which a court determines whether the document is actually valid and ensures that relatives and creditors are notified. This process can take several months and drain thousands of dollars from your estate.

So here’s one way to avoid that entirely–create that living trust. Essentially, a living trust is a legal document you create which holds property (such as brokerage accounts and real estate). When you die or are incapacitated, the property is smoothly transferred to your beneficiaries. This transfer occurs outside of the probate process, which saves a TON of hassle.

Not everyone needs one of these documents, but it’s something which you can’t paint over with a broad brush. Which is why it’s important to walk with a competent guide on these matters.

By the way, if you own property in more than one state, a living trust is a no-brainer. Going through probate in multiple states is a nightmare.

Another advantage to a living trust is privacy. A will is a public document, and anyone can come to the probate hearing to see if any fights break out. Living trusts aren’t published in any courthouse, so people can’t gain easy access to them. That’s quite nice.

Myth 5. I could be held responsible for a deceased parent’s debts.
No, you’re not responsible for credit card debts from your parents.

In general, children aren’t responsible for a deceased parent’s debts, and in some cases spouses are often exempt as well. Again…you can’t paint it with a broad brush. But as a general rule, the estate is responsible for paying debts. If there isn’t enough in the estate to cover the amount owed, the debts usually go unpaid.

So really … there is no “great” reason to avoid this kind of planning. And it just so happens to be something that would make a great addition to your tax preparation process. So, let me know if you’re interested and we’ll help you get started on the right track.

I hope this helps. To your family’s financial and emotional peace…

Warmly,

Lillian Turner-Bowman
(718) 953-6455
Lillian’s Professional Services

Lillian Turner-Bowman Confronts 3 More Estate Planning Myths That Might Surprise You