According to a Forbes article, at least 51 percent of Americans between the ages of 55 and 64 don’t have a will. That number is even higher among those younger than 55, at 62 percent. Perhaps one big reason that people don’t act and create their estate plan is due to the number of myths and misunderstandings associated with estate planning.
Whether due to misinformation from friends and family members or inaccurate reports by the media, these myths may sometimes stop those who were intending to engage in estate planning from doing so. If you have any assets at all—and most everyone does—and you want to ensure you leave those assets to the loved ones you choose, then it’s essential that you have an estate plan in place. Let’s take a look at the most common estate planning myths:
The government will seize all your assets if you die without a will. This is absolutely not true. Virginia state law dictates how your assets are divided among your heirs. Should you have absolutely no living relative, not even a third cousin twice removed, then your assets will go to the state of Virginia. But, you can easily avoid this scenario by having a comprehensive Virginia estate plan in place.
If your estate goes through probate, it could cost your heirs a considerable amount of money and can cause the process to drag on for months and months, or even years. There are costs associated with probate, such as court filing fees, attorney’s fees, and other miscellaneous costs. However attempting to avoid probate can also result in other costs. A Virginia estate planning attorney can advise you on the pros and cons of probate as opposed to other possible estate planning options that avoid probate. Generally speaking, a simple probate can last from six to 18 months. The costs associated with the probate process are typically about 2-5 percent of the value of the estate, although this can vary significantly depending on the size and complexity of the estate.
A trust will always significantly reduce the costs associated with probate. While a trust does not require probate and there are no direct probate costs, a trust may have a higher upfront and maintenance costs. Additionally, when set up to provide financial distributions over a period of time, there will be additional tax preparation fees, and probably additional attorney’s fees as well.
Estate planning protects your assets. This is not necessarily true as estate planning and asset protection are two different things. It is important to understand that estate planning is not asset protection, and even a family trust will not protect your assets from business risks and lawsuits.
Only the very wealthy need an estate plan. Absolutely not true! As stated above, if you have any assets at all, you may benefit from an estate plan. Furthermore, an estate plan is not only about leaving your assets to those you choose. Your estate plan also ensures your finances and health care decisions will be taken care of as you wish should you become incapacitated. It also ensures that minor children will have the guardian of your choice, not someone appointed by the court, in the event of your death.
Estate taxes—also known as “the death tax”—are unfair. First of all, very few estates are subject to the estate tax. You may have heard that when you die, the government will tax money you’ve already paid taxes on. While this may be true in certain instances, more often it is not. Most estate taxes are imposed on income on which you have not previously paid taxes.
You think you are too young for an estate plan. Of course, no one ever wants to think about a tragedy happening to a relatively young person, but, unfortunately, they do occur. At the time you actually need an estate plan, it could be too late, no matter your age.
Take the time now to speak with an experienced Virginia estate planning attorney at Northern Virginia Trusts and Estates to ensure those you love will be well-taken care of in the event of your death or incapacity. Contact us today at 703.938.3510 to learn more.