Most Common Estate Planning Myths
Some of the most common estate planning myths are listed below and debunked.
Myth #1: Estate plans are only important for the wealthy
FALSE! In fact, nothing could be further from the truth.
Estate plans are not only important for wealthy people like Bill Gates, Buffets, and Rockefellers of the world.
Yet, More than 60% of all Americans die without one, leaving their estates to be divided and taxed according to predetermined federal and state laws, perhaps in ways they didn’t intend. Regardless of the size or value of your estate, peace of mind comes in having a thoughtfully and professionally prepared estate plan.
Myth #2: I can draft my own will using an online estate planning service
FALSE! This is a huge mistake.
Buying a pair of shoes online is one thing, but drafting a will online is another. If you think that you will be saving a few dollars by using forms found on the internet or in a do-it-yourself book to prepare your estate planning documents, then your family will be in for a rude awakening.
Soon your family will learn that part or all of your documents are not legally valid and don’t work as anticipated, or that your assets go to individuals not named in your will due to outdated beneficiary designations.
Myth #3: I already have a will and don’t need further estate planning
FALSE! Think you’re covered for life?
This is one of the most common and tragic mistakes of estate planning. People dying with outdated, incomplete or unsigned wills – all are recipes for disaster.
Your (entire) estate plan– will, trusts, health care proxy, etc. – needs to be reviewed at least every four years and as often as any of the following events/scenarios occur:
- The birth, death or disability of a child
- A change in state residency
- A change in marital status
- A significant change in the value or character of your financial assets that would make your estate taxable on a Federal or State level
- A change in intended beneficiaries
- The death of a beneficiary
- The death or disability of a guardian, trustee or personal representative
- A change in tax laws affecting federal and or state estate tax deductions
- A change in privacy laws that affect access to medical or financial information
- You have minor or problem children
- You want to leave some or all of your estate to charity.
Myth #4: Federal and State Estate tax laws are one in the same
FALSE! While some states have moved to match the Federal exemption level, some have not.
It’s important to know the laws where you live. For example, in 2018, the estate tax exemption in Maryland is $4 million.
In 2019, the exemption level was scheduled to match the federal estate tax exemption amount, which is $11.2 million. However, Maryland recently adopted changes to separate from the Federal exclusion amount and limit the state estate tax exclusion to $5 million in 2019, with no adjustment for inflation in future years.
Similarly, in Washington, D.C., exemptions for 2018 and future years was increased to match the federal exclusion amount. However, the Council of the District of Columbia is seeking to reduce this amount by 50 percent, introducing a bill to retroactively change the D.C. estate tax exemption to $5.6 million for 2018, an amount that is to be adjusted for inflation in future years.
In addition, even if you are exempt on a Federal level, your estate may still be exposed to State estate taxes. Most individuals don’t realize that state laws are very specific about what can and can’t be in a will, trust, or medical or financial power of attorney.
State laws are also very specific about who can and can’t be a witness to a signing of a will or trust, and what formalities or protocols must be observed when signing.
It’s imperative to work with a very knowledgeable estate planning attorney such as Altman & Associates to avoid making common, yet costly planning mistakes.
The Bottom Line?
Laws are continually changing. Only a qualified estate lawyer can help you to sort out complex family, financial, or estate tax situations and ensure that your estate is distributed how and to whom you want it to upon your death.