Estate planning is one of the most important steps any person can take to make sure that their final property and health care wishes are honored. It ensures your loved ones are provided for in your absence. Due to the overwhelming amount of information regarding estate planning, there are many myths and misconceptions that often need to be cleared up. Here are the top ten estate planning myths:
Myth 1
“If I have a Will, my estate will not go through Probate”
That is incorrect. A Will is a letter to the judge regarding how you wish the judge to authorize the executor to distribute your assets. While a Will is better than no Will at all, it does not protect your estate from a probate proceeding.
Myth 2
“If I have a Trust, my estate will not go to Probate”
That is incorrect. Although may people have trusts, few people have properly funded their trust. Funding is the process of placing assets into your trust. Many folks fail to complete this important step.
Myth 3
“If my estate is less than $5 million, my beneficiaries will pay no taxes when they inherit from me”
This is also incorrect. While no estate tax is currently applicable to estates less than $4 million in Illinois (up to $5.45 million in other states), many beneficiaries must pay tax on inheritance of certain assets, e.g., individual retirement accounts, 401 k plans, pension plans, and 403b plans. However, with proper guidance of an attorney, these taxes can be significantly reduced.
Myth 4
“If I have a Land Trust, my assets will not go through a court process”
A land trust only works if all the beneficiaries trust one another and get along. Many land trusts must pass through the court system where the beneficiaries do not agree.
Myth 5
“I should appoint my eldest child to be my Executor”
No way! Appoint the most qualified child. If you can’t determine who is the most qualified, speak with your attorney.
Myth 6
“If I have real estate and no trust, my estate must go to Probate”
In some situations, this is true, but it is possible to avoid probate if all other assets do not exceed $100,000 and all the beneficiaries get along. In this case, the house can be sold without having to go through a court process.
Myth 7
“Money to minor children is best left through a Will”
If children are under the age of 18 and receive an inheritance, a guardianship estate must be opened for those children. This can be an emotional, expensive and time consuming process. In general, children can be better served through the use of trusts.
Myth 8
“I should disinherit my child with special needs who receives SSI and Medicaid benefits”
Absolutely not! However, consider the use of a supplemental needs trust to protect the child’s benefits and inheritance. See an attorney who focuses on elder and special needs law.
Myth 9
“My husband had a Will that disinherited me, so now I get nothing”
Spouses are entitled to an elective share and a spousal claim. Depending on the entire estate, this could render the entire estate your property.
Myth 10
“Joint Tenancy bank accounts become the property of the surviving joint owner”
While banks will often give the funds to the surviving joint owner, this is not always the lawful thing to do. If the account was set up for convenience purposes and bill paying, the intent to transfer to the surviving joint owner may not have been properly established, and the account rightfully belongs to the Estate. This is very fact specific and you should consult an elder law attorney to assist you.
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