Estate Planning Myths
Multigenerational Planning: Important Conversations to Have about Money
False. While how much you divulge is up to you, being open and honest with your loved ones can help alleviate misunderstandings that could arise after your passing. Sharing this information is especially helpful in three instances:
1. You have chosen to treat individuals in the same generation differently.
2. You have placed additional requirements or restrictions on how your money and property are to be used.
3. You have skipped an entire generation or group or individual that would typically inherit from you (spouse, children, or grandchildren).
Also, if you want your estate plan to benefit multiple generations (some of whom may not even be born yet), it can be helpful to have your loved ones understand what money and property they will have access to and your intentions regarding access for future generations. With a clear understanding of your wishes, your loved ones can take the lead in carrying out these wishes after your passing and make the right decisions about the family wealth that will continue your legacy.
Planning After Landing Your New Job
This is false. When you are asked to complete a beneficiary designation form, you need to fill it out as soon as possible. If you were to die without completing the beneficiary designation, the proceeds would either be distributed to your estate (requiring your loved ones to go through the costly, public, and time-consuming process known as probate) or directly to your closest living relative as determined by the terms of the life insurance policy. The specific rules of the life insurance policy determine which option would apply, but the ultimate outcome is the same: someone else would be choosing who gets the money, not you. You are given the opportunity through the use of a beneficiary designation form to determine who will receive the proceeds of your life insurance policy. Do not let someone take that choice from you.
Additionally, whoever is determined to be the rightful owner will receive a check for the full amount, unless the beneficiary is a minor, in which case the court will choose someone to hold on to the money for the minor until the minor reaches the age of majority (eighteen or twenty-one depending on your state). This leaves the money open to many vulnerabilities, like being spent on frivolous luxury items, taken in a divorce, or seized by creditors through a lawsuit or a bankruptcy.
False. When you add a child or anyone else to your bank account, you are making that person a co-owner of the account. Your child can pay bills using the money in your bank account, but your child can also use the money for any other purpose. This is because your child now co-owns the account.
In addition, because the bank account would be deemed owned by your child, it would be susceptible to division in a divorce, seizure in a lawsuit, and theft by a predator.
Standalone Retirement Trusts
Planning for Unmarried Partners
Preparing a Successor Trustee
Estate Planning for LGBTQ Clients
It is true that, absent proper estate planning, the law will distribute most (if not all) of your money and property to your spouse. However, this may not be the best way to pass on your money and property. If everything passes to your spouse outright, there is no protection for the property or money your spouse receives. Even if you want your spouse to be free to spend their inheritance from you as they please upon your death, your money and property would become 100% your spouse’s, and they could do whatever they want with it–including lose it to creditors or to an anticipated lawsuit. By creating a trust, the money and property can be available for your spouse’s use, but you can provide protections to ensure that creditors, or a second spouse, do not have access to what you have worked so hard to earn.
Additionally, without estate planning, including the creation of a trust, your money and property may have to be distributed through the probate process. Probate is a court-supervised process where an appointed individual gathers your money and property, pays all of your outstanding bills, and then distributes the remainder to the appropriate individuals. Depending upon the situation, the level of court involvement can vary, but no matter what, the details of this process can be found out by anyone because probate is a very public process.
Estate Planning for Singles
False. While it is a remote possibility that the state may be the ultimate recipient of your money and property, that would only occur if you had no other living blood relative to inherit your money and property. Although the law varies by state, generally speaking, your money and property would first go to a surviving spouse if you are married, then to your descendants (children or grandchildren), parents, siblings, and your siblings' children, in that order. Some state statutes may even look beyond that to your aunts and uncles or cousins. Depending on the size of your family, there could be a lot of people who would have to predecease you before your money and property would be turned over to the state.
Although the likelihood of the state receiving your hard-earned money and property is slim, this should not be used as an excuse not to plan. You have the ability to choose exactly whom you want to receive your money and property as well as when and how. Do not let the state take that choice away from you.