Misconceptions That Can Put Your Loved Ones at Risk
Fact: No one likes to think about their own death.
Combine planning for your eventual demise with engaging in a complex legal and financial planning process, and it’s no wonder why many people shy away from estate planning. And there are many misconceptions surrounding the estate planning process that can make it seem like an even more daunting task.
However, estate planning is an essential part of helping ensure your loved ones’ long-term financial security. In order to properly plan, you must be well informed about various estate planning strategies and the role they play in protecting your heirs.
Following are six common estate planning myths and why you shouldn’t fall for them.
Myth #1 – Estate planning is for the wealthy.
Many people are under the impression that if their assets are less than the lifetime estate tax exemption amount ($13.61 million per individual or $27.22 million per married couple in 2024), they don’t need to worry about estate planning.
Fact: Everyone over the age of 18 should engage in estate planning, regardless of their assets. While it’s true that a well-executed estate plan can help lower estate tax liabilities, it also provides the following benefits:
- Helping ensure your healthcare decisions are carried out according to your wishes in the event you become incapacitated or unable to make decisions for yourself
- Authorizing a trusted individual to manage your finances should you become unable to do so
- Providing financial security for your loved ones should you pass away unexpectedly
- Naming a guardian for minor children
- Helping ensure minor children who inherit assets have a structured plan to make sure they’re financially mature enough to receive and use assets
It’s also important to note that, unless Congress takes action in the meantime, the current lifetime estate tax exemption amount is scheduled to revert to approximately $5 million per individual ($10 million per married couple) on January 1, 2026, when the provisions of the Tax Cuts and Jobs Act of 2017 expire. That means many more families will be subject to estate tax going forward.
Myth #2 – Estate planning is for the elderly.
Fact: Estate planning is an important process to engage in regardless of your age. In fact, the estate planning process should begin at age 18, when an individual becomes legally recognized as an adult.
If you experience an accident or injury at any age and don’t have the necessary estate planning documents in place, your family members may be unable to obtain medical information, visit you in the hospital or help manage your finances.
At Creative Planning, we recommend all adults, regardless of age or assets, have the following documents in place:
- Health Insurance Portability and Accountability Act of 1996 (HIPAA) waiver (a signed HIPAA waiver helps ensure your loved ones have access to your medical information and can visit you in the hospital should you experience a serious accident or injury)
- Healthcare power of attorney
- Living will/advanced medical directive
- Financial power of attorney
- Basic will (a trust may also be advisable under certain circumstances)
Myth #3 – Estate planning is expensive.
Fact: While it’s true the costs of implementing complex estate planning strategies can add up, the expense is typically well worth the long-term hardships, stress and tax liabilities your family would face without an estate plan in place.
In certain situations, such as drafting an estate plan for a young adult, the cost tends to be relatively low. Some simple estate planning documents are even available online for a low fee. Just be sure to check in with your wealth manager to ensure your estate planning documents are in line with your overall financial plan.
Myth #4 – If I have a will then my assets will avoid probate.
Fact: A will is an important document and a great first step in developing your estate plan. However, a will alone doesn’t protect your loved ones from the time consuming and expensive probate process. In fact, probate is the only way an executor designated in your will can take action and follow the instructions laid out in your will.
It’s important to understand that probate proceedings are a matter of public record, which means anyone, including creditors, fraudsters and estranged family members, can find out who’s inheriting your assets and how much they stand to receive.
If your goal is to avoid probate, you may need to implement additional estate planning strategies, such as a trust. Your wealth manager can help you determine whether a trust makes sense, based on your financial situation and goals for the future.
Myth #5 – My assets will automatically pass to my heirs without an estate plan in place.
Fact: If you die without a will or trust, intestacy rules will dictate who handles your financial affairs and who receives your assets. These aren’t necessarily the people you would have chosen. Also, there are significant time, expense and administrative requirements associated with dying intestate. All these challenges can cause undue stress for your loved ones and reduce the amount your heirs ultimately receive.
To save your loved ones heartache, stress and money, it’s important to have estate planning documents in place.
Myth #6 – I created a will years ago, so I’m all set.
Fact: Implementing an estate plan is a great first step, but estate planning should be viewed as an ongoing process, not a one-time event. Your life, family and goals are constantly evolving, and your estate plan needs to keep up with your changing needs.
For example, perhaps you established an estate plan during the early years of your marriage, leaving everything to your spouse and planning for minor children. Your children are now grown and able to help manage affairs for you, but you still have a very elderly sibling designated as the executor. Maybe you divorced your first spouse and are cohabitating with someone in a jointly owned home — if so, how will that home be distributed at your death?
It’s not just marriage and divorce that should prompt you to reevaluate your estate plan. It’s smart to conduct a thorough review at least every three to five years, as well as any time a major life event occurs, such as:
- The birth of a child or grandchild
- The death of a loved one
- The start of a new business
- A home purchase
Could you use help getting started with estate planning? Creative Planning is here for you. Our in-house estate planning attorneys work alongside your wealth manager to help ensure you have a solid estate plan that’s in line with your overall financial plan and goals for the future. For more information about how we can help you navigate common estate planning myths, please schedule a call with a member of our team.
