Throughout my 16 plus years of practice as an estate planning attorney, I've run across many misconceptions about wills, trusts, probate and estate taxes, but here are what I consider to be the top 6 myths.
1. You don't need an estate plan because your family will "do the right thing."
While you may be confident that your family will "do the right thing" after you die and divvy things up in a fair and equitable manner without any major fights, I'm here to tell you that this simply will not happen. Funny things happen when family and money collide without any written plans or directions. Only a last will and testament or revocable living trust which has been created with the help of an estate planning attorney will insure that your estate will go where you want it to go.
2. You don't need an estate plan because your spouse will inherit everything.
This may or may not be true depending on how your assets are titled, who you have named as the beneficiaries of your life insurance and retirement accounts, and the laws of the state where you live at the time of your death as well as the laws of the state where you own real estate at the time of your death.
3. Only the mega wealthy need a complicated estate plan.
If you're in a second or later marriage, you're single without any children, you're in a committed relationship but aren't legally married, or want to leave part or all of your estate to charity, then chances are that regardless of your net worth, you'll need more than just a basic estate plan.
4. Probate really isn't all that bad.
While I've heard that this is true in some states like Colorado and New Jersey, it's certainly not true in Florida. And even if probate isn't considered to be all that bad in your state of residence (or in another state where you own real estate), it's really easy to avoid probate, so why would you want to leave your loved ones at the mercy of a probate judge who knows nothing about you, your finances or your family?
5. "Death taxes" will take a big bite out of your estate.
If you're talking about federal estate taxes, then this couldn't be farther from the truth. With a $5 million federal estate tax exemption, it has been estimated that less than 1/10% of estates will be subject to federal estate taxes. And if you're talking about state estate taxes or inheritance taxes, then first you'll have to live in (or some cases own real estate in) one of the only handful of jurisdictions that collect estate taxes and/or inheritance taxes, and then the value of your estate will need to exceed the state exemption. And even if your estate will be subject to taxes at the state level, in general state estate tax and inheritance tax rates are significantly lower than the federal estate tax rate of 35%.
6. Once your estate plan is done, it's done for good.
I've seen this myth rear its ugly head often in my estate planning practice. Why? Because we live in complicated times with complicated laws and have complicated families and complicated finances. So an estate plan that worked 5 years ago, let alone 10 or 15, will undoubtedly not work work in today's even more complicated world.
The bottom line - The days of "simple wills" and "easy probate" are long gone and have been replaced with complicated lives, finances and laws, and under these circumstances one size certainly can't fit all or even most. Estate planning is serious business and a must for anyone concerned about what will happen to them if they become incapacitated and what will happen to their loved ones after they die.