Many people put off making an estate plan because of certain misconceptions. As an Orange County estate planning attorney, I have heard many misconceptions about estate planning, three of which deter people from starting an estate plan.
1. Estate planning is all about distribution of wealth and I am not wealthy.
Many people associate the word “estate” with verdant country villas, diversified corporate holdings, investment in stocks and ownership of rare artworks. The truth is the term “estate” covers your savings, insurance policies, car and real estate properties – no matter how small or how few. With your “small” estate, you may not think of paying estate taxes when you die. But you should be thinking of who will get these items of your estate when you pass away. In fact, people with modest estates may even have more reason to have an estate plan as their heirs may not have the means to pay off penalties or charges if there is are questions on the estate. These charges may eat into the inheritance which otherwise would have gone to your heirs.
Moreover, estate planning is not just about transferring your assets to your heirs. It is about caring for your heirs even after you die. If your children are minors, you must have an estate plan that designates a guardian for them when you die. In the absence of such designation, the court will appoint a guardian – and you wouldn’t want that!
2. Estate planning is about preparing for your death and I am in the pink of health.
It is true that we make an estate plan so that we have instructions as to how to transfer our estate to our heirs when we die. In the prime of our life, death does not seem imminent. We cannot imagine dying from any of diseases such as cancer, diabetes and cardiovascular ailments. But anyone can die from calamities, crime and accidents. It’s not pleasant to think about untimely death, but isn’t it always better to be prepared?
Another contingency that you have to prepare for is mental or physical incapacity. It is best to have an estate plan while you are at your prime.
3. Estate planning is a complicated and expensive process. Wills and trusts are legal documents, and thus should be executed by a professional. While you can download forms online, you may not add the appropriate details in order to make your trust valid or save as much in taxes for your heirs as possible. Therefore, it is best to have someone who does this for a living execute a will or trust that is best for your situation and family.
Remember that estate planning is for everyone of legal age – not just for the wealthy and seniors. It is also not as complicated and expensive as you think. If you do not yet have an estate plan in place, the best time to start is NOW.