Most people don’t know a lot about wills, trusts or probate. After all, they’re not exactly topics you’d discuss at the dinner table. However, each of these documents plays a role in how you plan to distribute your assets. It’s important to know the basics. Not just for knowledge sake, but so that you’ll know enough to recognize common myths as you run across them.
(Download our free checklist: Estate Planning Basics)
The subject of probate has stirred a lot of attention and as you may have guessed – some misguided information as well. In today’s blog, we’ll discuss some common misconceptions surrounding wills and probate. This will help you cut through the clutter and determine next steps.
Myth 1: I’m too young for an estate plan.
There are various reasons to develop an estate plan while you’re young. In addition to a will or trust, an estate plan includes documents like an advanced directive, authorization for release of medical information and power of attorney, which are helpful throughout your lifetime.
If you have children, having an estate plan in place is especially important. Rather than leaving these important decisions in the hands of a judge, you’ll likely want to choose a guardian for your children as well as a person to manage your assets for their benefit.
Myth 2: I don’t have enough assets to warrant an estate plan.
Estate planning is for everyone. It doesn’t matter whether your estate is large or small; it allows you to control who receives it. If you don’t have a plan in place, your estate will likely need to be probated, distributing your assets in accordance with state statutes. If you become incapacitated, a guardianship proceeding would also be needed to appoint a person to make decisions concerning your care and assets.
Myth 3: Estate planning is only used for distributing assets.
Distributing assets is a big part of estate planning. However, there’s more to it than money. It’s about relationships and taking care of those who are dependent on you if something were to happen. An estate plan creates peace of mind, knowing your loved ones are being looked after.
Myth 4: Without a will, everything is passed on to the state.
If you pass away without a valid will, the distribution of your estate is determined by the state statutes. Generally, the spouse and children are first to inherit assets. But in rare cases when no relatives are found, it will go to the state.
Myth 5: I have a will; my estate doesn’t need to be probated.
The opposite is true. A probate proceeding is required to confirm the will before property can be distributed to any beneficiaries. A will must be filed with the court and become public record, open to inspection by anyone. Probate can be a lengthy and costly court proceeding that’s likely to take more than six months to complete.
Myth 6: It takes several years to probate an estate.
Typically, any delays you encounter in the probate process is time mandated by state laws providing creditors time for filing and notice to heirs of probate hearings. After a waiting period, the estate can be closed as soon as the personal representative has gathered assets, paid debts and taxes. In states with an inheritance tax, they may also need to obtain a tax clearance letter.
Though these factors affect the time it takes for an estate to be probated, the most common causes of delays are family arguments, larger estates or ongoing income, creditor claims or lawsuits, selling real estate, or delayed responses from the personal representative.
Myth 7: I don’t need an estate plan; I’m not leaving assets to my spouse.
Couples may decide not to leave the other a significant amount of assets. This typically occurs when a party owns a lot of personal assets independently. But many couples in second marriages are primarily concerned with providing for their children from the previous relationship.
State law gives surviving spouses the right to refuse assets left in the deceased spouse’s will. However, in the case where the surviving spouse is left nothing or very little in the will, they have the option to take an elective share of the estate (also known as taking against the will). The state may grant the surviving spouse one-third of the estate, a year’s support, the right to live in the family home. This varies by location, of course. And in some places, the longer the couple has been married; a larger share may be claimed.
If you don’t want to leave property to each other, it’s important to discuss these plans with an attorney. In Oklahoma, the only way to give up rights to take against the will or an elective share is through a prenuptial agreement.
Myth 8: The oldest child is entitled to be the executor.
If the deceased names someone the executor, the court will appoint that person unless there’s a reason not to. Examples of this scenario might include something like a felony conviction or disability. If there isn’t a will or person named as an executor, the court will appoint someone. In most states, the surviving spouse is first in line then the children follow. If more than one child wants to be an executor, siblings can serve as co-executors – but it typically isn’t advised.
Myth 9: If spouse’s name is on the bank account, I don’t need a general durable power of attorney.
Having a person’s name on your bank account allows them to pay bills for you. But, it allows them to use the money in the account for anything else they want. A safer strategy that allows someone to access your funds for bill payment is creating a general (financial) durable power of attorney.
In a situation where you can no longer handle finances, the person named as your durable power of attorney would take the document to your bank, open a POA account – titling their name as attorney-in-fact for you. From there, they would be able to pay bills on your behalf.
Even if you have a trust, naming a durable power of attorney is necessary. There are certain powers that are granted to that appointment alone – like filing a lawsuit, dealing with insurance or handling assets that aren’t in your trust.
Myth 10: If no one contests the will, I don’t need a lawyer.
If you’ve been appointed to personal representative, you’ll need to notify creditors of the death and settle any debts of the estate. From there, you’ll need to take care of any other issues before the estate is distributed to the designated beneficiaries.
The main reason you need an attorney is to ensure you’ve fulfilled the duties required of you under the law, met deadlines set forth in the statute and that assets have been distributed correctly. An experienced lawyer will walk you through the process as efficiently as possible and their guidance will be essential if conflicts arise.
Probate can be avoided through a carefully drafted estate plan. However, if it is necessary, a skilled attorney will be able to guide you every step of the way – ensuring no problems come up later.
The relationship you have with an estate planning attorney should mimic that of a doctor or financial advisor. It should be a lifelong person you can trust and confide. To learn more about probate and estate planning, we encourage you to reach out to our team today at (405) 701-6376.
Preserve Your Legacy With Estate Planning
In this simple, 10-step guide, we walk you through an overview of the estate planning process so you can begin outlining it as soon as possible. Click below to access your free copy now.