Many people do not know why they need an estate plan, what kind of estate plan they need, or how to start creating their estate plan. The following estate planning myths focus on the mechanics of estate planning and demonstrate why a quality estate plan is important for everyone.
Myth: If I pass away without a Will, the state will get my assets.
There are many reasons to prepare a Will, but concern over the state’s taking your family’s inheritance should not be one of them. If someone dies without a valid Will, then state law takes effect—and every state has its own inheritance rules. Generally, the spouse and children of the deceased are first to inherit. In some states, a surviving spouse and minor children share the deceased parent’s assets, which could result in a young child’s inheriting a significant percentage of his or her parent’s assets. That fact alone is a good reason to write a Will: you probably don’t want your eight-year-old to inherit one fourth of your bank accounts.
So, do assets ever go to the state? Yes, but only when no relatives can be found, and that is extremely rare. As long as a relative can be located, no matter how distant, the state cannot inherit your assets.
Myth: I need only a basic Will.
A basic Will, such as one that you might complete using an online resource, is certainly better than no estate plan. And if you never get around to creating even a simple Will, the state has a default plan already in place for you. Unfortunately, the state’s plan might be contrary to your wishes. Plus, all your probate assets will be a matter of public record, and following the state’s default plan will likely be slow and expensive. As the saying goes, “Anything worth doing is worth doing well.”
Myth: A Will allows heirs to avoid probate.
Actually, the opposite is true: all property transferred via a Will is guaranteed to go through probate. A Will is like an instruction booklet to the courts that outlines your wishes. Through the process of probate, a court oversees the distribution of the estate and ensures that your wishes, as outlined in the Will, are executed. To avoid probate, you’ll likely need to draft a Trust. However, there might be tools to avoid probate without drafting a will or a trust, as we’ll discuss in the third part of this series.
If you missed Part 1, you can read it here.