Do you have an estate plan? If you’re like more than half of Americans, you might not. There are a lot of myths buzzing around about estate planning, but I wanted to dispel the top three that I hear often. Let’s dive right in!
Estate Planning Myth: A Will Is All You Need
Many people think that a will is the beginning and end of their estate plan.
Reality Check: A Will Is Only One Piece
A will is only one piece of your estate plan. In total, the estate plan includes:
- A will (or trust)
- A living will – in the state of Georgia this is called an Advance Directive
- Power of Attorney (durable and health care)
- Beneficiary designations
- Guardianship designations (if applicable)
Your will helps to outline the distribution of your wealth after you pass away. A living will can help to outline how you want your health care to be handled if you’re incapacitated and unable to vocalize your desires. A durable power of attorney allows an agent (like an attorney) to make decisions about your wealth on your behalf. A health care power of attorney allows an agent (like an attorney, a child, or a spouse) to make decisions about your health care on your behalf.
Beneficiary designations should be listed on each retirement account (401k, IRA, etc.) you own, and on every insurance policy. You can also designate beneficiaries on many non-retirement accounts via a “Transfer on Death” registration. Finally, a guardianship designation outlines the future care of your children should you pass away or become incapacitated while they’re still minors.
Sound complicated? It doesn’t have to be. A seasoned estate planning attorney can help you set up every piece of your estate plan relatively easily, and a financial planner can help you sort through how to set up your estate plan in a tax-efficient way while ensuring your wealth is being distributed according to your values.
Estate Planning Myth: It Can Wait
Too many individuals think that they can put off estate planning until retirement. In more clear-cut terms: people think they don’t need an estate plan until they might actually kick the bucket when they’re older.
Reality Check: Everyone Needs an Estate Plan
The truth is that everyone needs an estate plan. Estate plans are important whether you’re a single millennial who is trying to mitigate student loan debt or dedicate your life insurance policy to your parents or a married retiree with three kids and grandchildren.
It’s true that estate plans help to pass on your wealth, but it’s impossible to know when you could pass away. Although many people seem to think that estate plans are only something you need to worry about when you get closer to retirement, I’d like to suggest that an estate plan is even more important when you have younger kids, or when you have a notable number of accounts that would need to be distributed during your career (like a 401K through your workplace, an IRA, etc.).
Estate Planning Myth: Estate Planning is Too Time Consuming
Some people avoid estate planning because they’re worried that it will take too much time, or be too expensive. This couldn’t be farther from the truth. Although estate planning isn’t as simple and straightforward as putting together a will, it doesn’t have to be all-consuming for an extended period of time.
Reality Check: Estate Planning is Easier When You Work With a Professional
Estate plans can seem complicated, but it’s not as overwhelming as you may think! Working with professionals to help walk you through the process doesn’t have to be time consuming or stressful.
The truth is, everyone needs an estate plan – no matter your age, marital status, or whether or not you have any heirs. An estate plan helps you to:
- Make decisions about your health if you ever become unable to do so
- Guide your family to make financial decisions about your wealth if you pass away
- Avoid messy probate
- Put parameters in place for your pets
- Help to decide who your children will live with if you and your spouse or partner pass away
- Set up a trust or scholarship fund with your accumulated wealth
And so much more.
You’ve worked hard for your money over the course of your lifetime. An estate plan helps put guidelines in place to make sure your wealth is used in a way that aligns with your values after you pass away. Working with a financial planner, or an estate planning attorney, can help you to build an estate plan seamlessly. Want to learn more, or need an attorney recommendation? Contact me today. I’d love to help you expedite the process, and make sure that it’s done correctly to ensure your wealth is passed on to the next generation in a tax-efficient way.