A lot of people make inheritance planning mistakes because they harbor certain misconceptions. In this post, we will look at a few common misconceptions so you can go forward with sound information.
Trusts are only useful for wealthy people.
Very high net worth individuals have to be concerned about the federal estate tax, because it carries a whopping 40 percent maximum rate. These people utilize irrevocable trusts to mitigate their exposure.
This being stated, the revocable living trust is another estate planning device that can be useful for a wide range of people that are not extremely wealthy.
In fact, this type of trust would not be the right choice for someone that is exposed to the estate tax, because assets in a revocable living trust would be part of your estate for tax purposes.
The living trust is one possibility, but there are other trusts can satisfy certain aims that you may have even if you are not among the financial elite.
A last will should be used if you want to facilitate fast asset transfers to the heirs.
This is patently false. If you were to use a will as your primary estate planning device, you would name an executor in the document. This individual or entity would not be allowed to act independently.
Under the laws of the state of Hawaii, the will would be admitted to probate, and the court would supervise during the administration process. This is a time-consuming hassle for the rightful inheritors, and assets cannot be distributed until probate has run its course.
There are innumerable expenses that accumulate during probate, and this money is essentially coming out of the pockets of the heirs.
Another drawback is the fact that probate is a public proceeding. Anyone that is interested can access probate records to find out how the assets were distributed.
Getting back to the previous section, if you use a living trust instead of a last will as the centerpiece of your estate plan, the trustee could distribute assets to the heirs outside of probate. As a result, all of these pitfalls would be avoided.
It’s easy to plan your own estate using DIY documents that you can get online.
There are websites that sell legal documents, including last wills and other estate planning documents. They contend that anyone can plan their own estate using worksheets and downloads that they can buy. You save money on attorney fees, and your do-it-yourself estate plan will be just as good as any plan that could be prepared by a professional.
The first reason why DIY estate planning is a bad idea is because a layperson is not going to know which document or documents to use. We have touched upon the value of living trusts and the other trusts that be used. Why would someone that is not an attorney be aware of the options and why you may want to take a particular approach?
There is also the matter of incapacity planning. Your estate plan should account for events that may take place toward the end of your life, and this involves the execution of certain legal devices.
Estate planning is a profound endeavor that involves a good bit of money and a lot of emotion. It is not something that you should treat as a suitable DIY project, but you don’t have to take our word for it.
A number of years ago, Consumer Reports conducted a study into the subject, and after they reviewed the data, they advised against these boilerplate notions.
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Our firm has prepared an estate planning worksheet that you can go through to gain a more comprehensive understanding of the process. It is being offered free of charge, and you can visit our worksheet access page to get your copy.
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