Estate Planning Myths

Estate Planning Myth #1

Many people believe (or are told) that a Revocable Living Trust can reduce estate taxes.

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

Many people believe that estate plans are only for the wealthy and well-to-do.

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.

If you want to protect your assets and family with an estate plan but don't know where to begin, then request a FREE copy of our Estate Planning E-Book and Newsletter and discover:

• How to create an estate plan to protect you and your family
• If you should be concerned about estate taxes
• The 4 basic requirements for a valid will
• 7 important questions you should consider when making a will
• How to protect yourself and family if you become incapacitated or disabled
• The advantages and disadvantages of a trust
• Other estate planning tools everyone should know about

Phone: 888-495-7289 * Fax: 888-559-8856

Serving your interests in Maryland and Washington, DC, including Rockville, Gaithersburg, Potomac, Bethesda, Chevy Chase, Columbia, Camp Springs, Fort Washington, Upper Marlboro, Bowie, Forestville, Prince Frederick, Waldorf, Largo, Temple Hills, Greenbelt, College Park; and in Montgomery County, Baltimore County, Baltimore City, Howard County, Prince Georges County and Anne Arundel County.

If you have questions or comments, you are welcome to contact us at info@kinseylawgroup.com or
888-495-7289.

This article is provided as an educational service by Kinsey Law Group, P.C. and is not intended to, and nor does it, constitute legal advice. The use of this site does not create an attorney-client relationship. The Kinsey Law Group cannot guarantee that the information on or linked to the website is correct, complete, or current. Contacting the Kinsey Law Group does not create an attorney-client relationship. Do not transmit time-sensitive or urgent information through e-mail or the law firm's website.

Copyright © 2009. All rights reserved.