“I’m Not a Billionaire”—and Other Misconceptions About Estate Planning

Most of us would rather postpone thinking about estate planning. But putting it off—or avoiding it altogether—can be a huge mistake. It’s also fraught with misconceptions and myths. Here are five to consider:

Number One: I’m not super-rich, so I don’t need to think about estate planning.

True, only a tiny sliver of heirs will face estate taxes this year: The federal estate-tax exemption is a cool $11.58 million per person, or $23.16 million for a married couple. But the tax laws can change on a dime, and in fact, the exemption is scheduled to revert to $5 million per person in 2026. Many states levy estate tax too, some with exemption ceilings well below the federal level.

As important, estate planning is also about helping assure financial security and peace of mind for those who depend on you while you’re very much alive.

Number Two: I’m too young to worry about estate planning.

Wrong; life is notoriously unpredictable. Plus, some estate planning vehicles may best be set up early, like trusts to ensure funding for a minor or special-needs child (the latter while still protecting his or her government benefits). Lifetime gifting can be part of an estate plan, too: up to $15,000 per year in 2020 without incurring gift tax—$30,000 for married couples—to each of an unlimited number of beneficiaries. You can also use part or all of your $11.58 million estate-tax exemption for additional gifting instead.

Number Three: I already have a will.

Great, but that’s not enough. We urge you to also draft at least a living will, which will specify your wishes about end-of-life health care, and a durable medical power of attorney, which names a proxy who will make health-care decisions for you if you become unable to do so.

Further, most wills need to go through probate—a public procedure that can take months. A living, revocable trust, which you can undo at any time, avoids probate, remains confidential, and may allow for a more-precise distribution of your assets. An irrevocable trust shields assets from estate taxation and is available in specialized variants to benefit spouses (first or subsequent), children, grandchildren, charity, and even profligate beneficiaries. With an irrevocable trust, you’ll typically cede control to a trustee, but you’ll have versed him or her in your wishes. And trusts are only one in an array of estate-planning tools.

Number Four: My family will honor my wishes without all these documents.

Maybe so—but the more your requests are spelled out, the better chance they’ll be honored, and with family harmony preserved. Similarly, make sure that your beneficiaries have the information they need to carry on necessary business in your absence (including the access codes to your online sites).

Number Five: I can do this on my own.

Not likely; the planning instruments are famously complicated, and so are the tax laws that govern them. And since some estate planning decisions are difficult, if not impossible, to reverse, making a mistake can lock in consequences that are at odds with your wishes. Don’t forgo the advice of professional financial, legal, and trust and estate experts.

In short, estate planning is as much about your life as your death: the life you’re living now and the legacy that lives after you. We can help; give us a call.