Estate Planning Part 1: Myth-Busting

Posted by on Nov 22, 2010 in Wills and Estate Planning |

With anything that we plan on a regular basis, like vacations and family get-togethers, we become familiar with what works, what to avoid and, hopefully, how to prepare properly in advance. But when it comes to the larger issues like estate plans, our mistakes can cause unintended hassle – and even hardship – for those we care for.  Here are some common estate planning myths that call for a closer look:

I’m not “wealthy”, so I don’t need an estate plan…do I?

If you are happy to have your estate distributed by someone you’ve never met, using a formula created by the government, then you may not “need” an estate plan. For this reason, young people with few assets typically don’t have wills. But everyone else should consider developing an estate plan.

I do have a will. Isn’t that enough?

A well-thought-out will is one of the results of a good estate plan, but not a substitute for it. Powers of attorney and health care directives are, of course, other important parts of the plan. But a good overall estate plan gives you more than that: it ensures your wealth is transferred – without waste – to the people or purposes you choose. That way, you don’t incur unnecessary tax or probate fees, and you place the minimal burden on the people you care for.

What kind of “burden” can an estate create?

Disposing of and distributing assets is a big undertaking. But two things are especially important here. First, even simple estates can take a year or two to wind up…it’s a lot of work, and there are expenses involved. Beneficiaries may have to wait a long time before funds are released. That’s where life insurance can help, because funds are received soon after the date of death and are not tied to the probate process.

Second, consider your executor – likely a relative or trusted personal contact. Make sure their job isn’t any harder than it needs to be. Get documents organized and let your executor know where they are located. Think about whether having a professional executor would make sense.

So, what is estate planning really about?

It might be easier to define what estate planning is NOT. It’s not primarily about tax planning, or avoiding probate fees, or buying life insurance, though all those things may be involved. It’s more generally about spotting potential future problems with any and all financial and legal decisions you are making today.

But estate planning is also about exploring your values and your legacy. For example, what do you believe about leaving money to your children? If you have inherited money, what should happen to those funds? Do you believe in spending your wealth or preserving it for your heirs? What charities or social causes do you want to support?

The reality is that many of us avoid estate planning – for the wrong reasons. Resolve to change that, and ensure your estate is optimized.

For expert advice in this article, ElderWise interviewed Mr. Tom Junkin, Executive VP of Personal Trust Services at the Fiduciary Trust Company of Canada.

Vol. 6, No. 10

© ElderWise Inc., 2010
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