Estate Planning Myths

October 19-25 has been named National Estate Planning Awareness Week, an observance that reminds the public how important estate planning is to financial wellness. Unfortunately, common myths convince many people they don’t need to create or update an estate plan, such as:

Only wealthy people need a plan. Without a will, state succession laws and the probate process decide who serves as the estate representative and where assets go. The probate process is publicand can take anywhere from a few months to a year or multiple years.

Proper estate planning considers tax liabilities. Yes, the federal estate tax exemption in 2020 is $11.58 million, thanks to the Tax Cuts and Jobs Act. However, the exemption is set to expire at the end of 2025.And despite this generous federal exemption, around a dozen states levy their own estate taxes (with a lower exemption than the federal), and six states collect an inheritance tax. The highest top rate among state estate taxes is 20 percent; the highest top rate among state inheritance taxes is 18 percent.

I already have a will. Estate plans are not meant to be “one-and-done” documents. They should be reviewed biennially, if not annually, and updated following a major life event (e.g., a birth, death, marriage, divorce, or move to another state). Beneficiary designations trump wills and should be revisited regularly. A complete plan should include a current list of all digital accounts with usernames, passwords, and security questions.

A will is enough. A thorough estate plan includes components designed to protect your income if you become disabled during your working years and protect your assets if you require costly long-term care as you age.It should also provide direction in the event you become unable to make decisions regarding your health and finances. Minimum documents include a Health Care Proxy (designates an individual to make decisions regarding medical treatments), an Advanced Care Directive (provides treatment instructions regarding prolonging life), and a Power of Attorney (names the person you wish to make financial decisions).

Estate planning can be complex. With so much at stake, it’s crucial to get it right. We are happy to work with you, your attorney, and tax professional to secure and make the most of your legacy. Securities America and its representatives do not provide legal or tax advice; consult with an attorney or accountant regarding your specific situation.