For high earners and affluent individuals, estate planning is not only about protecting wealth – it’s about ensuring your legacy is preserved. Yet, myths surrounding estate planning can lead to costly mistakes. Let’s debunk six estate planning myths that could jeopardize your financial future.
Myth #1: “I have enough assets in retirement accounts with beneficiaries – I don’t need a will.”
Even if a significant portion of your wealth is held in retirement accounts, there are other assets that need attention. Your home(s), personal property, savings and checking accounts, vehicles, and investments outside retirement accounts require proper planning to avoid costly and unintended distributions. A Will ensures these assets are distributed according to your wishes.
Myth #2: “Trusts are only for billionaires.”
This estate planning myth persists because establishing a trust typically costs more than a simple Will. However, trusts can save time, money and effort in the long run by helping you reduce the quantity of assets that need to go through probate or avoid probate entirely. Trusts also provide more control over how and when your beneficiaries receive their inheritance.
Myth #3: “You only need to do estate planning once.”
Life is constantly changing – your estate plan should evolve with it. Your intended beneficiaries may change – they grow up, they grow old, their circumstances change, and in some cases, they may even predecease you. And the more wealth you accumulate, the more frequently you should review and adjust your estate plan. A one-time approach may fail to account for changes in family dynamics, asset appreciation, or shifts in tax laws that affect your overall financial strategy. Remember that your estate plan includes more than just your Will and trusts.
Myth #4: “I can just use an online template.”
While you might think that a DIY estate plan could work for you, the complexities of your estate likely require a tailored approach. Online templates often fail to address the nuances of state laws and individual wealth structures. Specialized legal expertise in estate planning is needed to ensure your estate plan reflects your unique financial situation and goals. And by working with a professional to create your estate plan, you are more likely to establish a relationship with an attorney who can help your heirs navigate the process after you’re gone.
Myth #5: Once I create my estate plan, I’m done.”
Even after setting up a trust, additional steps are often needed. Most commonly, you will need to update beneficiary designations for retirement accounts to reflect the newly created trust. You may also need to change the titling on other assets. One of the most common estate planning failures is that assets are not moved into the trust, which can lead to those assets unnecessarily going through probate.
Ensuring that your assets are properly titled in the name of the trust is crucial to the estate plan’s effectiveness.
Myth #6: “I should store my estate documents in a safety deposit box.”
This may be one of the most important estate planning myths to dispel. Ensuring easy access to your estate documents is key. If these documents are locked in a safety deposit box, your executor may struggle to access them when they are needed most. Did you know that when you notify a bank that the owner of a safety deposit box has passed away, the bank is required to seal the box and only allow access by the executor or other authorized representatives of the estate as verified by court documents? Unfortunately, if the Will is in the safety deposit box, you won’t be able to file it with the probate court so that they can authorize an executor. Instead, keep your documents in a safe, accessible place and ensure your attorney and executor know where to find them.
Key Takeaway
Don’t let common myths undermine the estate plan that protects your wealth and legacy. With complex estates, professional guidance is essential for creating a plan that works for you today and adapts as your wealth grows.
Just like estate planning, there are lots of myths about financial planning. We highlight some of these in our financial planning myth series. Read on to explore whether it’s always better to defer taxes, pay down debt as fast as possible or buy versus rent.
This article is intended to be educational and thought-provoking rather than financial advice. When we work together in a financial planning engagement, we discuss your unique personal situation and your unique goals. During our financial planning process, we examine these factors and many others to determine appropriate financial strategies for YOU.