Commentary by Joseph Hankins
Estate planning is a powerful tool that enables you to direct exactly how your assets will be handled upon your death or disability. A well-crafted estate plan, including a living will and trust will ensure you and your family avoid the difficulties of a court-appointed guardianship or conservatorship, court-administered probate or an unpleasant estate tax surprise.
Unfortunately, many individuals fall victim to these estate planning myths:
Myth: I don’t need an estate plan because I’m not wealthy.
Fact: Estate planning is not only for the wealthy. It provides many benefits regardless of your income or assets. A good estate plan includes provisions for caring for a minor or disabled child, ensuring a comfortable standard of living for a surviving spouse, providing for pets or transferring ownership of property or business interests.
Myth: I’m too young to create an estate plan.
Fact: Accidents happen. None of us knows precisely when we will die or if we will become incapacitated. Even if you do not have substantial assets or a family to support, you should have a power of attorney and health care directive. These documents can ensure that you are provided for in the manner that you desire.
Myth: I don’t need a living trust if I have a will.
Fact: A properly drafted trust contains provisions addressing what happens to your property if you become incapacitated. A will only becomes effective upon your death, and outlines who will receive your property when you pass. If you own property, or have more than $100,000 in assets, both a will and a living trust are generally recommended.
Myth: With a living trust, the surviving spouse does not need to take action after a spouse’s death.
Fact: Failure to adhere to the proper legal formalities following a death could result in significant administrative and tax implications. While a properly drafted and funded living trust will avoid probate, there are still many tasks that have to be performed such as filing documents, sending notices and transferring assets.
Myth: Keeping property out of probate saves money on federal estate taxes.
Fact: Probate and probate avoidance are governed by state law and address how property passes upon your death. In other words, avoiding probate has nothing to do with federal estate taxes, which are set forth in the Internal Revenue Code. An estate plan can reduce estate taxes, but that is not related to trying to avoid probate.
Joseph Hankins, a Noblesville resident, is an attorney with Hankins Law, LLC, specializing in estate planning and business law. He may be contacted at 973-0700.