Debunking Estate Planning Myths 2.0 (Continued)

This article takes a deeper look at the most common estate planning myths and is a continuation of a previous blog article.  If you have not already, please read the first article about 12 common estate planning myths.

Myth 13: Estate Planning is expensive.
There is, of course, a cost for any law firm to draft appropriate documents for you, but it is probably less than most people think. That expense is always worth eliminating the stress, hardship and further expense that would be incurred by your family if you do not have an Estate Plan in place.

Myth 14: A Durable Power of Attorney gives my agent the right to take control of my assets after my passing.
A Durable Power of Attorney (DPOA) is a “must have” document that our office always recommends, but the authority under that document terminates upon your death. A DPOA cannot be used to distribute assets, pay bills or really do anything after your passing.

Myth 15: It takes too much time and effort to retitle your assets into a Revocable Living Trust.
There’s always 2 steps to creating a trust. Step one entails drafting and signing your Trust document, and step two entails funding your trust. E.g., retitling assets (bank accounts, real estate, investments, etc.) into the name of your trust. That sounds overwhelming, but it is usually a very quick and easy process. Most of it can be accomplished over the phone or online. Often, the only actual places where people have to get in their car and go to are their bank and the Dept. of Motor Vehicles. Our office provides you with detailed written instructions on exactly what you need to do with each of your assets.

Myth 16: If I create a Revocable Living Trust, my assets are protected from creditors.
Unfortunately, this is not true. A normal Estate Planning revocable living Trust does not protect your assets from your creditors. If you get sued and get a judgment against you, creditors can seize your assets that are titled in the name of your Trust as you are viewed as the owner of those assets even though they’re titled in the name of your Trust. Normal Estate Planning Trusts are not asset protection Trusts. I always encourage clients to have adequate insurance to cover any possible claims – insurance should be your first line of defense.

Myth 17: If I add a child’s name to my account, that will avoid that asset going through Probate Court when I die.
This is not usually correct. Often, bank accounts with a non-spouse are jointly titled as “tenants-in-common,” and that means when you die, the ownership of your portion of that account still needs to go through Probate Court. It also has some very unintended consequences in that the person the you put on the account with you does not need to share that with any of your other beneficiaries. The account is also subject to that other person’s creditors. Finally, another drawback to doing that is that the other person that you have listed on the account may be able to clean out the entire account while you’re living.

Myth 18: There will be a formal reading of my Will after my passing.
This is something that you see in movies, but never happens in real life. Wills used to be read before copy machines were common and when people were illiterate. The people named in your Will most likely will get a copy of your Will, but they will not be gathered in a room for a reading.

Myth 19: I can just list one of my children as the POD beneficiary on my assets, and they’ll divide it among their siblings.
Unfortunately, money makes people act differently than you’d expect. Legally, if you name only one person as a POD on your asses, that person has absolutely no obligation to divide up those assets to anyone else regardless of what they told you or what you told them. The law is clear in that if you only list one person as a POD beneficiary, that person is entitled the everything in the account. In addition, even if they decide to divide it up voluntarily, there could be gift tax consequences for them in doing so. As a result, this is never an advisable Estate Planning strategy to rely on.

Myth 20: I pre-purchased a funeral plan and cemetery plot so that my family won’t have to worry about paying for that after I pass away.
Like everything in life, there’s often a catch. If you prepurchase a casket, viewing, funeral, etc. with a funeral home, you want to check what other expenses the family commonly needs to spend. Often it doesn’t cover everything. You also want to inquire about what happens if that funeral home goes out of business – it could be that you’re out of luck and get nothing in return, and are not even able to get a refund. Be sure there is some type of clause in the prepaid contract providing that another funeral home will step in and cover everything, or that there’s some type of insurance that would reimburse you for your payment. Regarding repurchasing cemetery plots, realize that there are sometimes substantial expenses in addition to just buying the plot such as the headstone, digging the grave, filling up the grave, etc. Often, this is not included in what you pre-purchased. Talk to the cemetery and look at your contract.