Three Estate Planning Myths Debunked08-07-2014 |
Many investors are often so focused on accumulating assets for retirement that they neglect a crucial part of their financial strategy: an estate plan. Ashlea Ebeling on Forbes.com points out that half of all Americans don’t even have a basic estate plan. When it comes to estate planning, there is a great deal of confusion. To help clear things up, here are three estate planning myths and the truth.
- Myth: Estate planning is for wealthy people. Fact: Yes, it is true that estate planning can help mitigate estate taxes for affluent families. Any estate assets above $5.25 million can be taxed up to a top rate of 40%. But just because your estate is worth less than that does not mean you should skip estate planning. Estate planning involves, among other steps, drafting a will, assigning a power of attorney and creating a healthcare proxy or living will. A person who passes away without a will – known as dying “inestate” – often leaves behind a messy and complicated situation for a family in mourning.
- Myth: Estate planning is only important when dealing with death. Fact: Because estate planning deals with powers of attorney and healthcare documents, a solid estate plan is a key to having peace of mind as you get older. In most states, a power of attorney gives an individual the power to make legally binding decisions on your behalf if you will not or cannot make them. These can range from financial choices to recommending who might become guardian of your children. A healthcare proxy is similar in that you can assign an individual to make all or some of your healthcare decisions. A living will is a written statement of your wishes regarding your healthcare, but it may not be as binding as a healthcare proxy.
- Myth: When the paperwork is done, it’s done. Fact: Estate planning isn’t a dead-end street. You should sit down with your professional advisors on a regular basis to review and, if necessary, update your plan. For example, do you have any new grandchildren or in-laws who need to be considered? You should also be sure to discuss with your loved ones, heirs and beneficiaries any major changes you make so that they are not surprised or confused at a later date.
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