Myths and Frequently Asked Questions

Helping Clients Give Away Their Money and Property

Myth # 1: I do not have enough assets for an estate plan.

The 2024 Wills and Estate Planning Study from Caring.com reveals that 40 percent of Americans do not think they have enough money and property to create a will.^[1]

●        According to the survey, 14 percent more US adults cited “a lack of assets” as their reason for putting off estate planning in 2024 compared to 2023.^[2]

●        Lower-income Americans (those earning $40,000 or less annually) were twice as likely as the highest income group (those earning more than $80,000 annually) to give this response.^[3]

●        Nearly half of respondents earning less than $40,000 said they do not have enough assets to leave to anyone.^[4]

A will helps answer the question, “What happens to my money, property, and loved ones when I die?” It provides instructions for how you want your money and property divided up and distributed to your beneficiaries and designates a guardian to take care of minor children if something happens to both parents. Therefore, everyone—especially those who have minor children—needs a will, regardless of how much money or property they have.

What happens if a person does not have a will? Everything they own will be distributed to certain classes of family members according to a specified priority system (called intestate succession) that has been laid out in the laws of the state in which the person passes away. The decedent has no say over who gets what or how much they will get. If they have minor children, the children's fate is also left up to the state.

For the reasons just described, having a will is necessary, but it is just the bare minimum of a comprehensive estate plan. Other estate planning documents to consider are trusts and advance directives.

●        Trusts can be used for more complex beneficiary situations, such as a beneficiary who requires restrictions on their inheritance due to their age, poor spending habits, government benefits, risk of divorce, or other situation that requires discretion. Trusts are common with larger and more complex estates, but their flexibility makes them useful for a wide range of applications and amounts of wealth.

●        Advance directives relate to end-of-life care and what happens if a person becomes incapacitated. They include a living will that explains how the person wants to be treated if they are unable to make their own treatment decisions related to end-of-life care, as well as a healthcare power of attorney in which they name a healthcare proxy to make decisions for them under such circumstances.

●        General durable powers of attorney relate to the management of a person's legal and financial matters if a person is alive but unable to make financial decisions for themselves. A general durable power of attorney allows a person to designate the person or people they want to step in and manage their financial and legal affairs for them if they are unable. For example, this document can be used by an agent to access bank accounts to pay bills, talk to the employer's human resources department, access digital assets, sell real property, and represent the person in any pending or newly initiated lawsuits.

A will, trust, advanced directive, healthcare power of attorney, and general durable power of attorney are the main documents that make up an estate plan. An estate plan can also address considerations like business succession and charitable giving.

The amount of planning you wish to do is a personal decision that depends on many factors. Just remember that if you do not have a plan for what happens to your stuff when you die or become unable to manage your affairs, the state will decide for you.

Even if your money and property are canceled out by your debts and your estate is effectively worth nothing, you can at least specify in a will who you want to inherit items of sentimental value. An estate plan can also allow you to express your final wishes for burial, cremation, or organ donation.

So, if you think you do not have enough assets to make an estate plan, think again. Estate planning is for every adult, regardless of income level and estate size.

Myth #2: I cannot afford an estate plan.

The fourth most common reason that Americans do not have an estate plan, according to Caring.com, is that “it is too expensive to set up.”^[5]

Estate planning could cost as little as a few hundred dollars and as much as several thousand dollars. It is hard to pin down costs because each estate and attorney is different, and everyone has a different vision for what happens to their stuff. Estate planning is not a one-size-fits-all endeavor, and neither are the costs.

That said, when thinking about estate planning costs, it is helpful to consider an estate plan as an extension of a financial plan. Estate planning attorneys often work with professionals such as financial advisors and accountants because they can maximize the value of what the client owns and minimize undesirable outcomes. The same logic applies to hiring a lawyer for an estate plan. A properly drafted estate plan can help you avoid the many issues and obstacles that may arise if you become unable to make your own financial or medical decisions, and may help your family avoid conflicts and exorbitant legal and court fees upon your passing.

Online estate planning services are available from numerous providers and are usually less expensive than working with an attorney. But, without a proper application of estate planning and state laws, these services can be used improperly and result in a plan that is incomplete or flawed.

One of the main advantages of working with an estate planning lawyer is they can ask you questions that you did not previously think to consider. The small details matter in an estate plan. How documents are drafted can impact the result in significant and unexpected ways. Failing to add a crucial clause or enough detail could, among other things, lead to conflicts and litigation that drains money from the estate and ultimately costs more money than paying an attorney to review everything and get the details right.

Sure, estate planning costs money. But if the perception of cost is what is holding you back, you also need to think about the costs of not having an estate plan, which could be considerable. In almost every situation, the amount spent on an estate plan is well worth the peace of mind that it brings. Think of the costs of an estate plan as a worthwhile investment that will enable you to secure your legacy and provide your loved ones with much-needed guidance on how to handle your affairs.

Question #1: What happens if I do not have a will?

Roughly two-thirds of Americans do not have an estate plan in 2024, per Caring.com.^[6] That number has declined 6 percent from 2023.

Dying without a will is known as dying intestate. When this happens, the local probate court decides who receives the deceased person's money and property. This can be a potentially disastrous situation, as it is uncertain whether the court's decision will align with the wishes of the decedent.

To summarize the process of dying intestate, the court appoints an executor who is tasked with administering the estate according to the laws of the state where the decedent lived at their death. This process—known as probate—involves inventorying and valuing the accounts and property, identifying next of kin, paying off debts, and distributing any remaining money and property to heirs.

While this may sound straightforward, the court could make decisions that are very different from what you would decide. This begins with the crucial appointment of an executor and extends to who receives what—and how they receive it.

Most state laws give priority to a surviving spouse to serve as an executor and receive the decedent's money and property, followed by the decedent's children, grandchildren, parents, and siblings. However, the courts may not have insight into family situations, such as whether an heir has special needs or addiction issues, that require more careful asset distribution and management.

Further, you might not want to divide your assets equally. What is “equal” and what is “fair” can be two very different things. You cannot make this distinction without an estate plan, nor can you specify special gifting instructions or charitable giving.

The choosing of a guardian for minor children would also be put into the hands of the court if you die without a will. State judges have a duty to act in the child's best interests and identify an appropriate guardian. Yet courts usually have incomplete information when they make these decisions. They do not know the child on a personal level and may not understand the unique family dynamics. A family member will typically step forward and volunteer to act as guardian, but there is no guarantee that this person is the one you would have chosen to raise your child.

Estate planning also provides a mechanism to reduce taxes (e.g., by utilizing your spouse's marital deduction) and preserve more wealth for your heirs. Without planning for these issues, you are doing your loved ones a major disservice by failing to create an estate plan. They will have to determine what you would have wanted—instead of you simply telling them through your estate plan. If this happens, an unfortunate part of your legacy could be added family trauma and stress at an already difficult time.

There is not much room for interpretation or variance under intestate succession laws. An estate plan, on the other hand, can be tailored to your unique needs and wishes.

Question #2: What is the difference between a will and a trust?

Wills and trusts are foundational estate planning documents. Although it is common for people to have both, they serve different purposes.

●        A will is a legal document that allows you to put in writing who should take care of your minor children (and pets) when you pass away, who should inherit the money and property that is in your sole name without a named beneficiary at the time of your death, and, in some cases, your wishes for your final arrangements (i.e., burial, cremation, organ donation, etc.). This document becomes effective at your death. It can also include a testamentary trust that allows for more restrictions to be placed on a beneficiary's inheritance and may allow it to be given to the beneficiary over time.

●        A standalone revocable living trust offers greater control over your beneficiary's inheritance. Virtually any type of asset, from money to property to business ownership interests, can be held in a trust. Trusts come in many different forms and types and are highly customizable. Living revocable trusts are created during your lifetime and the management of trust accounts and property begins as soon as the trust agreement is signed. This provides the added benefit of incapacity planning to trust-based estate plans.

Everyone should have at least a will to avoid dying intestate and leaving their estate planning decisions up to the courts, and for many people, a simple will is enough to satisfy their estate planning needs.

Others may benefit from incorporating trusts into their estate plan. Creating a trust is a bit more complicated—and expensive—than creating a will. But trusts allow for greater control over the inheritances you leave behind and, unlike a will, can take effect while you are still alive. Money and property placed in a trust can also avoid probate and end up in the hands of a beneficiary quicker than those subject to the court process.

Trusts are often utilized when somebody wants to restrict when and how a beneficiary receives their inheritance. For example, they can stipulate that a beneficiary may only receive their inheritance at a certain age or upon reaching a certain milestone, such as graduation, marriage, or securing employment. Also, a trust could make trust funds available only for specific events or purchases, or could give a trustee full discretion to manage the trust's accounts and property on behalf of a beneficiary without giving a beneficiary any entitlements to the accounts and property at certain trigger points. Trusts can be used for charitable donations as well.

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