1. Being too young to estate plan.

You never know when a situation may arise that would require an estate plan. By then, it’s often too late. This can cause many more issues for your family in the future.  The truth is the moment you reach age 18, a basic estate plan is needed.  The moment you have children, the next level is needed.

2. Only the wealthy should make estate plans.

It is often believed that estate planning is reserved for those of high financial status. This has to do with so many attorneys being focused on estate taxes. This likely will not be an issue for you until your estate is worth more than $12 million. The main focus of estate planning is making sure that your finances are taken care of in case you are incapacitated or dealing with major health issues. It protects what is yours and what you want to be given to your family following your passing.

      3.You have to have a lawyer draft these documents

In a simple setting, many legal documents can be made by yourself.  However, if you are uncertain about what’s right then you’ll want to get in touch with an estate or elder law attorney to help out. 

4. I don’t need a lawyer for any of it 

Online document makers can cover many situations, but there may be issues that need legal advice that you may not be aware of. It’s always a good idea to run your ideas off an experienced attorney before relying on them completely. 

5. If I die without a will, the state will get my assets

If you are to pass away without a will, the state will not take your assets.  However, the courts will determine who gets what according to intestacy laws. You could check out a site called heirbase to see what the likely outcome might be. If you don’t like it, it’s best to get a will or trust drafted. If you have minor children then a will is necessary as it will determine who gets guardianship of your children if you are to pass away. 

6. If I have a will then I don’t have to worry about probate

Probate can be a long, expensive mess.   In Arkansas, it takes a minimum of 225 days and can often wipe out more than 10% of your estate in fees, costs and delays.   A will provides the court with guidance on your wishes but it does nothing to avoid the probate process. If you want to skip the mess then consider a simple living trust.

7. To avoid probate, you need a trust

An attorney will most likely be needed when drafting a trust. This document is best to avoid probate, but there may be an alternate way to make this occur.  Jointly owned property tends to be transferred to the other owner without going through probate. Life insurance, retirement plans, and 401ks can avoid probate as long as there is at least one beneficiary listed. In some states, this can also be done on bank accounts as well. Each state also has methods to skip or speed up probates for small estates.  Arkansas has a special instance when the estate is less than $100,000 and the decedent left no debts.

8. Trusts can avoid estate tax

Most trusts do not help to avoid estate taxes. But a properly drafted trust can be used to reduce or eliminate estate tax liability and capital gains taxes.

9. I don’t have enough money to worry about estate taxes

That may be true right now, however, estates over 5 million are scheduled to be subjected to a 40% estate tax after 2025. Some states have their own inheritance taxes with much lower exemptions.

10. I will have to pay a gift tax if I give someone over 17k per year.

Almost anything except for money given to charities, educational facilities, or medical institutions reduces your lifetime gift and estate tax exclusions. Currently, you can give away $17,000 per year per person without even having to report the gifts, let alone pay taxes.  But, you also have a lifetime exemption of over $12 million!

     Knowing these myths and mistakes can save you time and money in the long run. Make sure to consult an expert in the field to make sure you and your family are protected.