The Wealth Advisor
Estate Planning Awareness Week: Don’t Fall Victim to These Common Myths
Next week is Estate Planning Awareness Week (October 18–24, 2021). To that end, this month’s newsletter is geared toward helping you become aware of and better understand common estate planning myths. Left unaddressed, these myths can create serious trouble for your loved ones, often leading to intrafamily conflict, permanently damaged relationships, and lengthy and expensive court battles.
Myth #1: I did my estate plan a couple of years ago. I’m good!
However, life moves quickly, and even a couple of years can make a significant impact on the effectiveness of your estate plan to help you achieve your goals:
Any one of the above circumstances may be a good reason to meet with your estate planning lawyer again to determine whether changes should be made to your estate plan. In many cases, even a quick phone call to discuss any changes with your lawyer is advisable.
It is also essential to understand that some estate planning documents like your power of attorney or healthcare directive can, over time, become less effective from the perspective of certain financial institutions, business entities, or healthcare providers. If your circumstances change, it can be beneficial to review, update, and reexecute your estate planning documents. This will keep these documents relevant and effective when they need to be used.
Beyond the considerations above, a well-rounded estate plan requires a number of steps to ensure that the estate plan will work effectively when needed.
First, if you have a trust, have you funded it? Funding your trust means you have coordinated the ownership and beneficiary designations of your accounts and property to work with the trust. For real estate, a deed must have been recorded with the proper government recorder’s office. Most bank and brokerage accounts should be titled in the name of the trust if you want your trustee to control those accounts should something happen to you.
Second, have you checked the beneficiary designations on your retirement accounts and insurance policies to make sure they name the correct people or your trust? Life insurance policies should usually name the trust as beneficiary. Retirement plans may name a trust as a beneficiary, but be careful! Naming a trust as the beneficiary of an individual retirement account or 401(k) has significant tax consequences and may not be advisable in many situations. Speak with your tax advisor before changing the beneficiary designations on your retirement accounts.
Third, have you shared copies of your medical power of attorney and healthcare directive with your doctor and local hospital? Doing so can alleviate family members’ worries about digging through your documents should you have a healthcare issue in the future.
Fourth, in many states, a financial power of attorney document that names an agent to act on your behalf must be accompanied by a signed acceptance document from the agent before it can be used. Has this step been taken? If not, your estate plan may not be complete.
Fifth, writing things down does not guarantee that misunderstandings will not arise among your loved ones or beneficiaries. In addition to the important work of documenting your wishes, you should talk with your loved ones to help them understand the kind of plan you have put in place as well as the roles you want them to fulfill. Having open, honest communication with those individuals involved in your estate plan will minimize the chances for miscommunication and hurt feelings.
Myth #2: Avoiding taxes is the only reason to create an estate plan.
Myth #3: My spouse will get everything when I die.
Myth #4: A will avoids probate.
What You Can Do to Be Prepared
 However, this historically high estate tax exemption is set to expire in 2026 and reset back to $5 million per person (adjusted for inflation); see I.R.S., Estate and Gift Tax FAQs (Feb. 19, 2021), https://www.irs.gov/newsroom/estate-and-gift-tax-faqs.
 For example, in Florida, the amount in this example that would go to the decedent’s children from another marriage would be as much as 50 percent (see Fla. Stat. § 732.102(3) (2021)).
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