Combine planning for your eventual demise with engaging in a complex legal and financial planning process, and it’s no wonder why many people shy away from estate planning. Misconceptions surrounding the estate planning process can make it seem even more daunting.
However, estate planning is essential to ensure your loved ones’ long-term financial security. Stay informed about various strategies and the role they play in protecting your heirs.
Myth #1 — Estate planning is for the wealthy.
Many people think that if their assets are less than the lifetime estate tax exemption amount ($13.61 million per individual or $27.22 million per married couple in 2024), they don’t need to worry about estate planning.
Fact: Everyone over the age of 18 should engage in estate planning, regardless of assets. While a well-executed estate plan can help lower estate tax liabilities, it also provides the following benefits:
• Helping ensure healthcare decisions are carried out according to your wishes
• Authorizing a trusted individual to manage your finances should you become unable to do so
• Providing financial security for your loved ones should you pass away unexpectedly
• Naming a guardian for minor children
• Helping ensure minor children who inherit assets have a structured plan to make sure they’re financially mature enough to receive and use assets
Note that, unless Congress makes a change, the current lifetime estate tax exemption amount will revert to approximately $5 million per individual ($10 million per married couple) on January 1, 2026. That means many more families will be subject to estate tax going forward.
Myth #2 — Estate planning is for the elderly.
Fact: Estate planning should begin at age 18, when an individual becomes legally recognized as an adult.
If you experience an accident or injury at any age and don’t have the necessary estate planning documents in place, your family members may be unable to obtain medical information, visit you in the hospital, or help manage your finances.
All adults should have: a HIPAA waiver, healthcare power of attorney, living will/advanced medical directive, financial power of attorney, and a basic will. A trust may also be advisable.
Myth #3 — Estate planning is expensive.
Fact: Complex estate planning strategies can add up, but the expense is typically well worth the stress and tax liabilities your family would face without an estate plan.
In certain situations, the cost tends to be relatively low. Some simple documents are even available online for a low fee. Be sure to check in with your wealth manager to ensure your estate planning documents are in line with your overall financial plan.
Myth #4 — If I have a will then my assets will avoid probate.
Fact: A will is a great first step in developing your estate plan but a will alone doesn’t protect your loved ones from the probate process. Probate is the only way an executor designated in your will can take action. Probate proceedings are a matter of public record, which means anyone can find out who’s inheriting your assets and how much they stand to receive.
Myth #5 — My assets will automatically pass to my heirs without an estate plan in place.
Fact: If you die without a will or trust, intestacy rules will dictate who handles your financial affairs and who receives your assets. These aren’t necessarily the people you would have chosen. Also, there are significant time, expense and administrative requirements associated with dying intestate.
Myth #6 — I created a will years ago, so I’m all set.
Fact: Estate planning should be an ongoing process, not a one-time event. Your life, family and goals are constantly evolving, and your estate plan needs to keep up with your changing needs.
Gene Gard, CFA, CFP, CFT-I, is a Partner and Private Wealth Manager with Creative Planning. Creative Planning is one of the nation’s largest Registered Investment Advisory firms providing comprehensive wealth management services to ensure all elements of a client’s financial life are working together, including investments, taxes, estate planning and risk management. For more information or to request a free, no-obligation consultation, visit CreativePlanning.com.