Top Six Estate Planning Myths
From Johni Hayes, Senior Vice President of Thompson & Associates
Myth No. 1: I don’t have an estate. In the author’s opinion, anyone with assets over $10,000 should have an estate plan. Elements of an estate plan include a will, the only legal document that allows parents to declare guardians for minor children; a durable power of attorney for financial and medical matters; a living will; completed beneficiary designations; a plan for managing retirement taxes; legacy planning and trusts for special situations.
Myth No. 2: I did a will 20-30 years ago, so I’m done. An estate plan should be dynamic. It should move as life moves. Estate plans should be updated if marital status or state of residency changes, children or grandchildren are added to the family, assets increase significantly, charitable wishes change, a death occurs, or there are major changes in tax laws — as there have been annually in the United States since 2002. At the very least, estate plans should be reviewed every 3-5 years.
Myth No. 3: Only wealthy people need to worry about paying estate taxes. In Iowa, inheritance taxes may not apply to children, grandchildren, and charities; however, siblings, nieces and nephews may be taxed on inheritance dollars. Plus, income taxes can consume up to 35% of the value of retirement plans, depending on the tax bracket of the heir.
Myth No. 4: Putting my kids’ names on everything I own is a good estate plan. Each time you put your child’s name on an account, you’re making a gift — and gifts of more than $15,000 are subject to taxes. The liability of this could be horrific: accounts with children’s names can be considered assets to be divided if your child gets divorced or is sued.
Myth No. 5: I don’t need a lawyer. Estate planning is often the largest amount of money any of us will have the power to direct in our lifetime, impacting families greatly. Attorneys are required to advise only what is in your best interest, and an attorney that specializes in estate planning will be able to give you the best advice.
Myth No. 6: I have lots of time to put off planning my estate. Two things are certain in life: Death and taxes. The trouble is, you never know what day death is going to occur. Planning your estate can help you prepare for both. If you die without a will, the state decides what happens to your assets — and who wants that?