Estate Planning Myths
Estate Planning Myths
Estate planning is the process of gathering any assets you have, such as any financial accounts, real estate, and heirlooms, and planning how you will distribute those assets to your beneficiaries. During this planning process, you and your estate-planning attorney may also plan to determine powers of attorney, and health-care plans that you may not have the ability to discuss if you are incapacitated.
Estate planning may allow you to reduce the amount of taxes you pay when passing assets to your beneficiaries. Estate planning is meant for you to set yourself and your loved ones up for success if anything happens to you. If you don’t make a plan for your estate, there may be conflict between family members and assets may fall through the cracks. That's why it is always a good idea to start sooner rather than later. When you have a goal in mind for your assets that you want to achieve after you're gone, estate planning can help you reach it.
Estate Planning Myths
As you get ready to start planning your estate, you may come across some myths that can cause confusion. We'll debunk seven common myths to help you decide how to go about your Iowa estate planning.
Myth #1: I'm Too Young for Estate Planning
Estate planning is not only for the elderly or sick. It is for any adult of any age. It is impossible to predict a situation where you may not have control over the reallocation of your assets due to illness or death. All adults should have an estate plan in place to be prepared for the unpredictable inevitability of incapacitation or death.
If you start one plan in your 20s or 30s, it can be easier to keep track of your assets over a longer period of time. It’s common to start receiving more substantial assets like employment benefits, family heirlooms, or real estate as you get older. People also start taking on more responsibility. Planning for distribution of your assets and responsibilities early will help you avoid potential issues that can come up down the road, and estate planning professionals can help you create a specific, intentional while you're young.
Myth #2: I’ve Already Made a Will or Estate Plan, So No More Action Is Needed
Believing this estate planning myth may negatively affect you later in life if you have health changes and need to reallocate assets. Your estate plan must be dynamic, and changes must be made to your plan when substantial life events happen. Things like marital status, having children, asset expansion can warrant a change in your estate plan. It is preferable to update your plan once every three to five years to stay up to date with changes in your life or the law, but it can also be updated more frequently if necessary.
A last will and testament is one of the most common documents made during estate planning, but it should not be the only thing you discuss or update. Preparing trusts, wills and testaments, powers of attorney, business succession plans, and probate process plans are common topics of discussion during the estate planning process. They are specific to your needs and the goals you want to achieve, and they should be updated when necessary.
Myth #3: My Kids Should Get Everything, and It Should Be Split Evenly
You may want to leave most of your assets to your children. Still, you must give some consideration to what you want your legacy to look like and consider how it will affect your heirs. Children have different skills, motivations, and struggles. If you pass specific items that can help each child succeed, even though the assets may not be of the same value, you children may have a better chance of success.
Also, some sentimental items must be distributed to the right children or grandchildren, and they may not be worth the same amount of money. It can be hard to split everything equally, and sharing assetswill get complicated down the road. Leaving everyone with an equal share may not always work and is sometimes unrealistic.
Myth #4: I'm Not Wealthy Enough for Estate Planning
People should make estate plans regardless of wealth and number of assets. Estate plans may be associated with wealthier people, but the assets you have should not determine whether you can make an estate plan.
Estate planning is used for more than just asset distribution and paying taxes. It can also give you guidance on Iowa’s inheritance laws, designate a power of attorney for your finances, and give medical professionals directives regarding your healthcare if you are incapacitated. Planning can ensure your family members are taken care of in times of emergency and after you are gone.
Myth #5: I Don’t Need a Lawyer for Estate Planning
Each estate plan is specific to that person, and having a lawyer can set you in the right direction—even if your assets are few or small. More complicated situations can definitely benefit from legal advice, and lawyers are required to advise you with your best interests in mind. An estate-planning attorney can make sure you have all of the documentation you need to fulfill your wishes or reach your goals, protect you if you become sick, and validate the documents that are required for your estate plan.
Without legal advice, it is up to your family or loved ones to organize your affairs and distribute assets. Seeking legal help can be situational. But, at the end of the day, if you want to feel confident about your estate plan, legal advice can give you that feeling of security.
Myth #6: Estate Plans Are All About Tax Planning
Drafting a strategy to minimize taxes is a part of your estate planning, but it is not necessarily the primary reason to plan out your estate. Many taxpayers don't need to worry about paying federal estate taxes on their assets since the federal exemption is around $12 million. The inheritance tax can come into play during asset allocation, and your plan can help you reduce the amount you will pay. If you are concerned with having a taxable estate, seeking legal advice can ease your concerns and help you take the best course of action when required to pay taxes.
Myth #7: I Have to Draft a Trust to Avoid The Probate Process
There are ways to avoid the probate process in Iowa, for the most part. Life insurance, annuities, and retirement plans avoid the probate process when beneficiaries are listed. In Iowa, you may complete a payable-on-death (POD) designation to your various bank accounts, including checking, savings, brokerage, and other accounts. You can also prepare a transfer-on-death (TOD) designation for your stocks and bonds. This designation form is also called the beneficiary form.
Iowa does not allow transfer-on-death designations for real estate or vehicles, but you can apply for a simplified probate procedure if your estate is worth $100,000 or less. When estate planning, the proper documents may be prepared ahead of time to make things go smoothly in emergencies. It may be advisable to have a trust in place when preparing your affairs, but you may not need one.
Probate processes can take some time and become expensive, especially if you have assets in different states. Assets must go through the probate process in each state in which you have assets. When estate planning, you can organize your affairs so that your loved ones need not complete multiple probate processes.
Contact Our Iowa Estate Planning Attorneys
When estate planning in Iowa, it is important to consider creating a plan that suits your goals, and Whitfield & Eddy can help ensure your goals will be reached. We can give you the necessary information to help you through the estate planning process, the probate process, and litigation if necessary. Contact us today to learn more about estate planning in Iowa.