With the dawning of do-it-yourself estate planning and online services, myths and misunderstandings abound. While these services can be helpful in some limited scenarios, it takes a truly knowledgeable estate planning attorney to separate fact from fiction.
As you review the top five estate planning myths described below, consider whether you have fallen prey to some of these misguided notions, and be sure to contact Lovett & House Co., LPA for estate planning help today.
Myth 1: Estate planning is one-size-fits-all
One of the most frustrating aspects of DIY estate planning techniques is the notion that all plans—and clients—are the same. By contrast, each individual and family requires a custom-drafted estate plan to meet the individual needs and wishes of that particular individual. While some estate plans are relatively simple and straightforward, others are not (by a long shot).
As you consider your estate plan, remember that what may seem like a simple idea at first may develop into a much more complex matter later, and well-drafted documents are an essential component in avoiding hassle and conflict down the road.
Myth 2: Estate planning avoids estate tax
It is true that proper pre-planning can help minimize estate tax liability. However, even the most crafty and creative estate plan will likely not eliminate taxation altogether. Remember, this only applies to estates that are subject to an estate tax, which is a very limited number.
The use of complex trusts and asset protection strategies may be helpful for those who are facing a possible tax assessment; however, the current exemption for 2016 is set at $5.45 million. In other words, only the estates with the highest net worth will have to worry about this issue, and spending bundles of money on an unnecessarily complex estate tax avoidance plan may ultimately be an exercise in futility.
Myth 3: Failure to plan = Government seizure of property
We are not sure how this rumor got started, but nothing could be further from the truth. If you do not execute a will or trust to direct the distribution of your property at death, the government will not come in and take your property, except in extremely limited and rare circumstances.
What will happen if a decedent died without a will is that Ohio intestacy laws will kick in. Basically, this means the government will create a valid will for you and distribute your wealth in the way that is in accordance with state law.
If the deceased was married with children at the time of death, most of the property will transfer to the spouse and children, depending on lineage. If the deceased died without a spouse or children, intestacy laws will direct where the property will go, beginning with parents, siblings, and grandparents. If the estate representative is unable to locate a single individual to inherit the property, it is at this point that the property will revert to the state of Ohio—a rare instance indeed.
Myth 4: My spouse will handle everything; I do not need an estate plan
This approach to planning quite obviously leaves one blaring issue untouched: What if the other spouse passes away first? Moreover, many are surprised to learn that there is no natural power of attorney created by the marital relationship, and separate accounts and assets will remain such without proper documentation in place to allow the other spouse the right to access the assets.
Accordingly, we advise individuals to execute a durable power of attorney for finances, naming the other spouse as agent, to help ensure a seamless transition in the event of mental incapacity or other issues. Likewise, a well-drafted estate plan should contain contingencies in the event the other spouse were to pass away first, such as naming alternate executors and/or trustees to administer the estate.
Myth 5: Medicare will pay for the nursing home
Medicare covers short-term stays in skilled nursing facilities for purposes of recovery and rehabilitation only. In other words, never rely on Medicare coverage to fund a stay in a long-term care facility, as this just simply is not an option.
Alternatively, Medicaid coverage is available to those in need of long-term care assistance, but it requires proof of financial hardship in order to qualify. Known as “Medicaid planning,” planning ahead for long-term care through careful asset transfers can help reduce the wait time for eligibility, as well as reduce any penalty periods assessed against an applicant for Medicaid benefits.
In the long run, proper Medicaid planning can dramatically reduce the amount a family will spend on the staggering costs of long-term care, as well as help preserve an individual’s hard-earned nest egg for future generations.
Talk with a Board Certified Specialist in Estate Planning
If you have questions about estate planning or would like to discuss some of your planning concerns, please do not hesitate to contact Lovett & House Co., LPA in Ohio. Call today at 937-667-8805, or fill out the form to the right to request a free phone consultation.