There are a number of common misconceptions about estate planning. We want to dispel some of those for you. First, let’s look at why an estate plan is important.
You probably won’t complete your estate plan in an afternoon, nor will you probably want to do that. Estate planning, especially a comprehensive estate plan, is a complex task. It takes time, and it will, no doubt, force you to consider aspects of your life that you may not have before considered.
- Who will make critical health care decisions for you if you become incapacitated?
- Who will manage your property if you become ill and cannot perform tasks such as paying your property taxes?
- What happens to all of your or your spouse’s assets should one or both of you die?
Planning ahead gives you peace of mind now, and it will offer your loved ones a sense of stability during difficult times in the future.
Let’s Bust Some Estate Plan Myths!
Myth #1: Only the Rich Need an Estate Plan
FALSE! Estate plans are for everyone, and it isn’t just about money either. As mentioned above, an estate plan involves your property, your health care, and your overall estate.
So, as you can see, there’s more to an estate plan than just “who gets my money when I die.”
During the planning process you’ll elect a medical power of attorney who will ensure your health care wishes are carried out. You’ll name a power of attorney to act on your behalf in the event you cannot. Then there’s your estate’s executor who ensures your assets – life savings, real estate, family heirlooms – are delivered to the people or organizations you named, in addition to other important duties.
Making these plans will also ensure your loved ones know your wishes. Estate planning can also save your loved ones taxes in the future and prevent local courts from getting involved in your estate.
An estate plan is as unique as the individual. While some people will have a complex plan with various trusts, others may have a will and typical directives.
Myth #2: I Don’t Have to Plan Because My Spouse Will Get Everything
While many married couples do inherit each other’s assets after one passes away, it’s a little more complicated than that. (Is anything really that simple?)
In Colorado, even if you do not have children, there are situations where your spouse would not receive all of your assets after your death.
For instance, there are times when one’s parents are entitled to receive some of their adult child’s assets. If you die and your parents are still living, your spouse would inherit the first $300,000 of your intestate property. If there is a balance, your spouse receives 75 percent of it. The remaining money is inherited by your parents. (Intestate property are assets that are not in a will.)
Here’s an example:
|Your Assets at Death||$500,000|
|3/4 of Balance to Spouse||$150,000|
Also, if you automatically leave everything to your spouse, there’s no protection for the living partner or your assets. Let’s look at a couple of scenarios:
Scenario One – Spouse Gets Sued
Let’s say you die, and your spouse ends up with “everything” – savings and checking accounts, the house. Now, what happens if you die and your spouse is sued for a car accident they caused? Everything that the two of you jointly owned and became your spouse’s after you died – your real estate and money – can be used to pay for a judgement in a lawsuit.
Scenario Two – Spouse Remarries
OK, this time, lets say you pass away and your spouse later remarries? Any of the accounts that you owned together, let’s say a brokerage account, now belongs to your spouse and their new partner. They can spend it however they choose without considering potential heirs, like grandchildren, you had hoped would receive some of the funds.
Planning for unknown circumstances such as these can be difficult for married spouses to consider. One may feel as if they are being disinherited. That isn’t the case, though. Instead, it means the two of you can sit down as partners to decide what happens to the assets you own as a couple after your deaths. It will ensure the surviving spouse is cared for, as well as how other money and property will be gifted to other loved ones.
Myth #3: A Will Avoids Probate
OK, this could not be farther from the truth. Creating a last will and testament, in fact, actually prompts probate court involvement.
A will is a terrific way to name an individual to close out your affairs after you die. It is also a way to lay out who will get your hard-earned life’s savings, real estate, and other personal effects. You can even name a guardian for minor children or an adult with special needs in a will.
One thing a will cannot do is keep your personal matters private.
Again, that’s because in order to trigger the process of distributing your assets to your beneficiaries, your will must be submitted to probate court. In the state of Colorado, a will is public record.
Take a deeper look at the Colorado Probate Process.
Robinson & Henry, P.C. provides potential clients with a no-cost initial consultation. Go online or call (303) 688-0944 to set aside a convenient time to talk with our estate planning team.