Rachel A. Quinley
Estate planning is the process of making advance arrangements regarding your assets if you become incapacitated and determining asset distribution upon your death. It sounds simple, but many misconceptions about estate planning exist.
Misconception #1: I will avoid probate because I have a will.
A will only applies to your assets without named beneficiaries and does not help you avoid probate after your death. Assets held solely in your name without named beneficiaries must go through probate, a court-supervised process to inventory your assets, pay your debts, and distribute the remainder of your assets to your heirs or beneficiaries. Assets that pass-through probate are subject to court costs, attorney’s fees, and personal representative or executor fees. The process typically takes at least one year.
Misconception #2: My will alone determines how my assets will be distributed after my death.
Many people believe that their wills ultimately decide what happens to their assets after death. However, regardless of the terms of your will, your assets will pass to the joint owner or named beneficiary(ies) (a/k/a Payable On Death or Transfer On Death) on any bank account, life insurance policy, retirement plan (401k), or similar account with a named beneficiary designation. A good estate plan ensures that such assets are distributed as you wish.
Misconception #3: My trust will allow my estate to avoid probate without being funded.
Merely creating the trust is not sufficient to avoid probate. It is important to meet with an estate planning attorney to discuss ways to avoid probate, such as creating a revocable living trust, and to make sure your plan is consistent with your wishes. Your attorney can also help ensure that the trust is properly funded, with your assets placed into the trust or with the trust named as the beneficiary of your assets.
Misconception #4: Estate planning only deals with my assets after my death.
Estate planning is not just for your wishes regarding your assets after your death. Some of the most important estate plan documents protect you while you are living: a durable power of attorney for financial matters, a healthcare power of attorney, and a living will. If you become incapacitated and unable to make decisions for yourself, the powers of attorney appoint an agent or attorney in fact to act on your behalf, and the living will expresses your wishes regarding death prolonging treatments. They can help your family members avoid going through the courts to have a guardian or conservator appointed for you.
Misconception #5: I am a small business owner and my estate plan is my succession plan.
As a small business owner, it is important not to confuse personal estate planning with succession planning. Succession planning ensures business continuity after an owner retires, becomes incapacitated, or dies. Your estate and succession plans can overlap, so they must work together, especially for a family business. Even with a good succession plan, your state’s probate laws will determine what happens to your business after your death if you do not have a good estate plan.
Rachel A. Quinley, estate planning and probate attorney with Danna McKitrick, P.C., focuses her practice on the creation and administration of trusts and estates, wills, beneficiary deeds, financial and medical powers of attorney, guardianships, and other matters related to estate planning. Rachel can be reached at 314.889.7155 or email@example.com.