5 Estate Concepts People Get Wrong

The internet can be a tremendous help with research. However, there are a lot of myths, misconceptions, and outright falsehoods out there, especially when it comes to estate planning. We don’t have time to list them all, but here are the top five we have curated to help you get started.

1. Wills Don’t Control Everything

Many people assume that a Last Will and Testament is the preeminent document overseeing everything, and that what the Will says has the force of law. Unfortunately, that is not true, and many people mistakenly think that a Will is a complete plan.

If a person gets remarried and executes a Will naming their new spouse as beneficiary, it does not change life insurance policies, retirement accounts, or other beneficiary designations. Many extremely unhappy second spouses lost hundreds of thousands of dollars in life insurance and accounts to the first spouse because the policies and accounts were never changed. A Will can be an important part of a life and estate plan, but it is not by itself a plan.

 2. Wills Do Not Avoid Probate

Many people mistakenly believe a Last Will and Testament acts like an “all-access pass” to transfer assets after death and their estate avoids probate. They assume their executor can take the Will to the bank and start withdrawing money. Definitely untrue. A Will instructs the probate court how to distribute assets AFTER the probate court procedures are followed.

Many consider probate an expensive, time-consuming, frustrating process that gets in the way of family inheritance rather than help the family. Unfortunately, this is true of many estates and people try to avoid probate for their loved ones, including through use of a revocable trust. (For more information on revocable living trusts, check out the book Estate Planning Basics on Amazon at www.EstatePlanningBasicsBook.com).

3. Lawyers make A LOT of Money When People “Do It Themselves”

Ever wonder why there is no big outcry from attorneys about LegalZoom® or other online or computer-generated legal documents? It’s because they are easy for non-attorneys to mess up, and then attorneys end up litigating “what the person actually meant” in a court of law. Suddenly the documents to avoid problems end up becoming a huge financial boon for estate litigation attorneys. One attorney who regularly contests Wills mentioned that they always know they have a winning case when it is a LegalZoom® Will someone wants to contest.

Our firm has reviewed hundreds of estate plans, and, without fail, do-it-yourself documents never 100% state what the person intended, and about a third of the time or more they are not even signed correctly, making the plan completely worthless. Like everything in life, you get what you pay for, and planning right can save hundreds of thousands of dollars in legal fees, months of delays, and unfathomable aggravation.

 4. Unless You Say Otherwise, Beneficiaries Inherit at AGE EIGHTEEN

People are often shocked to find their estate plan does not line up with their accounts and insurance. Even if a person had the correct beneficiaries listed on their accounts, they are puzzled that age restrictions placed in their Wills mean nothing. Most believe 25, 30 or later are appropriate ages for inheritance, and those limits are in their Will or Trust. Insurance conveys large sums of money quickly while avoiding probate, but if a child is a direct beneficiary on the policy, the insurance company is legally obligated to give the funds to the child if they are 18.

 It’s not right. It was not intended. But that’s how it is. Insurance, bank accounts, and stock accounts are based on contracts. If the contract states a beneficiary receives the insurance/money/stock at 18, then it does not matter what was in the Will or trust.

5. Many Attorneys Know a Lot Less Than They Think About Estate Planning

More and more, attorneys focus on certain areas just like doctors, and estate planning can’t be adequately addressed by “general practitioners.” But unlike medicine, there is a good chance that a mistake will not be found until the person is deceased or incapacitated. By then, it is too late. When checking out an estate planning attorney, look for:

1. A high number of years specifically with estate planning,
2. A large percentage of the practice is focused on estate planning, at least fifty percent or more,
3. How much their firm makes on estate planning versus probate

This last one is mainly if you want to make sure that you avoid the probate court process as much as possible. Attorneys that grossly outnumber revenue on administering the probate process versus the planning end tend to recommend estate plans that put more money in their own pockets versus saving it for the family.

Solutions

There are many minefields and pitfalls to avoid in an effective life and estate plan, and our firm is experienced in helping our clients reach their goals. There are different techniques, documents, and methods of putting together a life and estate plan, but here are the main documents related to avoiding probate:

• A Revocable Living Trust
• A General Durable Power of Attorney
• A Healthcare Power of Attorney
• A Nomination of Conservator Form
• A Living Will
• A Pour Over Will
• BONUS: Appointment of Guardian

The documents work together to cover most main goals and form the foundation of a solid life and estate plan. While there is a lot of misinformation on life and estate planning, we can help you achieve your legal planning goals and help protect your family during already difficult times. For more information on a complete estate plan, check out the free program at www.FreeTrustCourse.com.