Top 5 Misconceptions about Estate Planning
As an estate planning attorney, I meet many couples with minor-aged children, and I’m always surprised by how many don’t have a will or another form of guardianship designation. Some of the reasons for this include many misconceptions about what estate planning is, and who needs the services of an estate planning attorney. The following are the top 5 misconceptions about estate planning that I hear the most often from young families:
Misconception No. 1) Only wealthy people need estate planning.
This is completely false! Everyone has an estate, regardless of whether you have $100 or $1,000,000. Estate planning is the process of taking account of everything you own and all the people under your care, and creating a plan for when you are no longer able to care for those people and assets. The most frequently used estate planning tool is a will. A will allows you to designate a guardian for all persons under your care, and gift your assets in the manner you choose. A person who dies without a will is referred to as having died “intestate”, and any assets owned by that person would be distributed according to statutory laws set by the state you live in. Likewise, the guardianship over any minor or incapacitated person would be determined by a court, based on what the judge felt was in the best interest of the minor or incapacitated person. Additionally, minors and incapacitated persons cannot inherit or manage their own funds. Therefore the court would also appoint a guardian or conservator to manage the assets, a position which would terminate automatically when the minor turns 18. A will is important because it allows parents to retain control over their assets and designate a specific age for the child to inherit all the funds. A will also gives parents the flexibility to outline how they want the funds allocated for the child.
Misconception No. 2) Estate planning is too expensive and time consuming.
Frequently I hear couples say they don’t want to invest the time and money to meet with a lawyer and create an estate plan. They think they might need one, but just can’t take the time off from work or spend a lot of money to see a lawyer. Although this is a legitimate concern, nothing could be farther from the truth. There are many attorneys in our area that offer concierge services, and they will come to your home on evenings and weekends for a consultation as well as to execute the will. A couple with a relatively simple estate (defined as an estate valued at less than five million dollars and does not involve ownership in any closely held corporations) should not need to spend more than a few hundred dollars per will.
Misconception No. 3) My parents told me they would be the children’s guardians. Isn’t that enough?
Often I hear couples tell me that they verbally designated who the guardian will be if anything happened to them, and they wonder if that will be enough. There’s no easy answer to this question. In short, the answer is no, it’s probably not enough.
In North Carolina, the appointment of a guardian for a minor is done through a guardianship court proceeding, regardless of whether the parents had a will or not. The determining standard in a guardianship proceeding is always the best interest of the child. However, a guardianship designation in a will is often enough to prove what is actually in the best interest of the child. Additionally, the parent’s designation can often help prevent family strife. Imagine how much more difficult things would be if the extended family was fighting over custody of the minor
children during an already stressful period. Parents often think this would never happen, but a loss changes people in unimaginable ways. Certainly, careful and thoughtful planning can help smooth this transition for an entire family and prevent the added stress of unnecessary conflict.
Misconception No. 4) I’m not making a will because I might have more kids, and I’ll need to redo it anyway.
Again, I hear this one all the time, and nothing could be further from the truth. A well thought out and drafted will can carry your family through many stages and life events, including the addition of a biological or adopted child. In consideration of this, I draft all my wills to include a clause that specifically states the will applies to any children born or adopted after the will is executed. The only instance when revising a will is absolutely necessary is when a couple divorces. A new will is also recommended when a couple moves to a different state, but that’s not always required. It’s a case by case determination based on a review of the estate planning documents.
Misconception No. 5) Can’t I just print some do-it-yourself forms online?
It’s not so much of a misconception, but more of a point of caution. There are some really great online tools and they might be a perfect fit for some individuals. But they can also be a terrible fit for others. The trouble is, there is no good way to tell. Online retailers attempt to fit every family scenario into the same forms, and that just doesn’t work. People with relatively simple family situations might be able to make it work, but those with a more complicated family setup probably should not. If anyone is considering using an online form for a will, here are some things to keep in mind: First, online forms allow some room for user editing and some edits can inadvertently invalidate a will. Unfortunately, online software may not able to detect or correct these errors. Second, online software might be able to help draft the will, but it cannot help you execute it. In North Carolina a will is only valid and able to be accepted by a court if it’s been properly executed. In order to be properly executed the will must be signed in the presence of two witnesses. It is also best practice to execute the will with a notary present so that the witnesses won’t need to appear in court to validate the will. If a will is not properly executed or the witnesses cannot be found in the case of an unnotarized will, it’s possible the court will not accept the will as valid and the estate would be administered according to the laws of intestacy. Unfortunately, these are problems that can be discovered when it’s too late with no options to correct it. Lastly, another point of caution with online retailers is they don’t provide any counseling regarding assets that will pass outside the will. People often think their estate planning is done once they draft their will. However, bank accounts, retirement accounts and life insurance policies provide the option of naming primary and secondary beneficiaries. These beneficiary designations override a will and need to be carefully coordinated with the overall estate plan.
Just remember, a will can be an inexpensive planning tool to protect your family by preventing unintended consequences and conflicts during a stressful time.