There are many misconceptions that are widely held regarding various aspects of estate planning. It is surprising how often people seek counsel to avoid problems that may, in fact, not even exist.
Last week, we reviewed two of these common misunderstandings. Many people wrongly believe that: (a) Inherited money will always be taxed; and (b) a trust will save income taxes.
This week, I would like to review several misunderstandings regarding Wills.
1. We are young – we don’t need a Will!
False. One of the most important provisions of a Will for a young couple is a provision in the Will that names the persons who should care for their young children in the event of their mutual death. Of course, this is a rare occurrence and most unfortunate; however, we have all heard of such situations.
Wouldn’t it be far better to select your choice for a caregiver than to have a court do so, or worse yet, to add additional trauma with an interfamily fight for custody of your own children.
Thus, even if you do not have substantial monetary wealth, a Will may provide you with significant peace of mind regarding the care of your most valuable possessions of all, your children.
2. I have only a small estate – so I don’t need a Will!
This is not a valid conclusion for several reasons, one of which has just been discussed, your children. However, even if you have no young children, a Will is useful to distribute your personal effects.
Consider the following surprising fact: Many very large estates are contested simply because of disputes over small items.
Recent experience with two large estates, each of which included assets of several million dollars, demonstrates this fact.
The large cash amounts were resolved without difficulty because the details were spelled out in the Will.
However, the sentimental family items such as jewelry, pictures, grandfather’s guns, etc. became the source of conflict and legal contest.
Although it is wise to use techniques such as Payable on Death transfers, TOD deeds or other non-probate transfers to simplify transfer after death without the need for probate, it is still wise to have a will prepared as a backup in the event you have forgotten to provide for the transfer of any asset.
The lesson – the emotional and sentimental items owned by a person may be of great importance to heirs. Failure to carefully identify your plans for distribution of those items at death can frequently result in conflicts that are equal to or greater than the conflict over monetary funds.
Although these are just two of the misconceptions regarding Wills, they take on special significances because they relate to some of the most important assets owned by a person.
Next week, more myths and misunderstandings regarding estate planning.