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Estate Planning Myths
Estate Planning Myth #1 MYTH: A Revocable Living Trust can reduce estate taxes. FACT:
This is a very common estate planning myth. A Revocable Living Trust
does not reduce your estate taxes. The main purpose of a Revocable
Living Trust is to avoid probate, plan for disability/ incapacity and
to protect your privacy. A
married couple can incorporate other Trusts such as A-B Trusts into
their trust-based or will-based estate plan to reduce their estate
taxes, but only the trust-based estate plan can avoid probate, plan for
disability/ incapacity and protect their privacy. A will-based estate
plan does not provide these protections. Estate Planning Myth #2 MYTH: Estate plans are only for the wealthy and well-to-do. FACT:
This is another common estate planning myth. More than 60% of all
Americans die without an estate plan, leaving their state’s intestacy
laws to determine who will inherit their property. Intestacy laws may
also determine who will act as guardian of your minor children. These
laws do not consider personal circumstances or personalities, so your
property and/or minor children can end up with a relative who you never
would have chosen. Regardless
of the size or value of your estate, peace of mind comes in having a
thoughtfully and professionally prepared estate plan, even if it is a
simple will. Estate Planning Myth #3
MYTH: Holding property in a joint tenancy arrangement is a cost effective way to avoid probate. FACT:
Holding property in a joint tenancy arrangement can avoid probate;
however, there can be negative consequences to doing so. The joint
tenant has ownership rights in the property leaving the property
subject to the joint tenants creditors. For example, a house put in a
joint tenancy arrangement where the joint tenants are a parent and a
child can be subject to the child’s creditors. In addition, estate
plans can be revoked or changed, but property in a joint tenancy
arrangement is not revocable without the cooperation of both parties.
If you have a disagreement with the joint tenant, you cannot simply
take the property back. Lastly, some joint tenant arrangements
involving gifts may have tax consequences. Estate Planning Myth #4
MYTH: Estate planning is only for the wealthy. FACT:
This is one of the most common estate planning myths. There are many
other factors or objectives other than wealth that you should consider.
For example, if you desire to do any one of the following, then you
need a comprehensive estate plan: (1) providing for and caring for a
minor or disabled child; (2)providing for or caring for a surviving
spouse; (3) transferring ownership of property and assets in accordance
with your wishes; (4) avoiding probate; (5) transferring closely held
business interests (6) transferring ownership of property in another
state; (7) charitable giving; and (8) avoiding taxes. These
are some of the reasons you should consider to plan your estate.
Everyone has their own objectives, but the size or value of your estate
is not the only reason to plan. Estate Planning Myth #5
MYTH: A Revocable Trust Can Protect Your Assets From Lawsuits FACT:
There are a couple of reasons why a Revocable Living Trust will not
protect your assets from lawsuits: (1) You have the ability to change
the terms of the trust when ever you want and you have the ability to
add assets to the trust and to remove assets from the trust (i.e., you
have total control over the assests), and (2) Although the assets in
the trust are titled in the name of the trust, you still personally own
the assets. Therefore,
a Revocable Living Trust cannot shield your assets from lawsuits or the
claims of creditors. If you are interested in Asset Protection
Planning, you should seek the services of an estate planning attorney
to discuss creating a comprehensive asset protection plan. Estate Planning Myth #6
MYTH: A Revocable Living Trust always avoids probate. FACT:
If you have a Revocable Living Trust and it is not properly funded, all
assets titled in your name at the time of your death and not titled in
the name of the trust will need to go through probate. To properly fund
the trust and avoid probate, you should retitle your assets such as
bank accounts and real estate in the name of the trust, and you should
update beneficiary designations of life insurance policies and
retirement accounts. |
You’re invited to call or
e-mail. "If you have questions about estate planning, asset protection, assisted reproduction or surrogacy, please send your e-mail today to nicole @ kinseylawgroup.com or call (301) 968-1630." — Nicole
Phone: (301) 968-1630 * Phone: (202) 643-1837 * Fax: (888) 559-8856
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2006 Kinsey Law Group. All Rights Reserved. Kinsey Law
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