The world of Wills and Trusts has created many estate planning myths through the years. However, they can be corrected, according to TC Palm in "Common misconceptions about Wills and Trusts."
Examples of some notable myths include:
- Myth #1 - Probate is awful and should be avoided. Truth - First of all, the “probate process” is just one step in an overall estate administration and it is designed to allow those interacting with an estate to confirm that they are in fact working with the estate’s authorized representative. In some States, the probate process is administratively complex, expensive and something you would want to try to avoid. However, the probate process in New Jersey is relatively simple and inexpensive. Once an Estate’s “personal representative” is appointed by the applicable Surrogate, further probate Court supervision of the overall estate administration process is not required in New Jersey. But in light of the complexities encountered in other States’ probate systems, and the inaccurate portrayals of the probate process by many unscrupulous people here in New Jersey, many people in New Jersey mistakenly believe that they must design estate plans to avoid probate.
- Myth #2 - If you do not have enough assets for your estate to pay the Federal Estate Tax, an estate plan is not needed. Truth - EVERYONE, yes EVERYONE, needs some level of estate planning. “Estate planning” is not just for the uber-wealthy (or even just for the moderately wealthy). Federal Gift, Estate, and Generation Skipping Transfer taxes are not, and never have been, the only (or even the main) reasons why everyone should engage in some degree of estate planning. Estate planning is an ongoing process that involves the creation, preservation and distribution of one’s assets by implementing various techniques and strategies designed to manage one’s assets while they are alive, protect one’s assets for the benefit of their loved ones, provide for the management of one’s assets and their own personal care in the event of an incapacity, and distribute one’s assets upon their death to the people that they want to receive them in a manner which effectively accomplishes both their objectives.
- Myth #3 - You should transfer your house to your children for a dollar in order to protect it. Truth - This is one of the most damaging myths that exist. This “strategy”, which is usually passed on from one uninformed neighbor or relative to another, can have numerous adverse consequences, including, but not limited to, the loss of a stepped-up income tax cost basis, the creation of a very lengthy penalty period for Medicaid qualification purposes, and a distortion of a parent’s distributive desires.
An experienced estate planning and elder law attorney can answer any of your questions regarding Estate Planning, Wills and Trusts, and can advise you on creating an estate plan that fits your unique circumstances.
Reference: TC Palm (May 1, 2018) "Common misconceptions about wills and trusts."