To the unfamiliar, the whole process of estate planning can certainly seem daunting, full of new jargon, rules and laws—and often creates a lot of confusion. For those who work in the industry, they know firsthand how some common myths and misconceptions often lead people to either not put the proper plan in place or procrastinate altogether.
Bhavik Patel is an attorney and CEO of St. Louis-based Sandberg Phoenix, who recently explored some of these common misconceptions—and how caregivers of older adults can learn how to better prepare for the years ahead by staying proactive about their estate planning.
Myth: Estate planning is only for the wealthy.
Do you have to be rich to need estate planning? Patel explained he’s yet to see a scenario where the process wasn’t worth it—regardless of a person’s asset sheet.
“I think every adult needs at least a health care and a financial power of attorney, which would give somebody the authority to help make their medical and financial decisions if they’re not capable of doing so.”
Without those documents, he said, most people would be forced to go to court through a process called a guardianship or a conservatorship, depending on your state.
“And those are pretty tedious processes,” he said.
Those powers of attorney documents are relatively inexpensive, he said—usually only a couple hundred bucks.
“Wealth is a factor in what type of estate planning strategy you need to incorporate, and you don’t have to throw everything under the kitchen sink at it. You need to do the right plan for the right individual. There are scenarios where the plan might not even require a will or a trust but just simply guidance – an hour, a 10-minute conversation, whatever – on how the assets should be titled. And that is an estate plan.”
Myth: My assets will automatically go to my spouse when I die, and then to my kids when my spouse dies.
Many people incorrectly assume their assets will follow a certain path by default, even if they don’t have an estate plan. Not so, Patel said.
“The reality is, at least in most states, half of your assets would go to your spouse and the other half would go to your kids. And that is not what most people want. So, if you don’t do an estate plan on your own, the state in which you live creates an estate plan for you.”
That path is often contrary to what most people actually would want, which is why Patel recommends proactive estate planning to better reflect your wishes for your assets.
Myth: Estate planning will cost way too much.
It’s too expensive. That’s one of the primary reasons for procrastination, Patel said, yet the alternative can cost so much more.
“The failure to plan ends up costing 10 times more than the proactive plan.”
Unfortunately, most people don’t fully realize that truth until they’re forced to—usually when a loved one dies and they see the consequences of not planning ahead.
(The choice of a lawyer is an important decision and should not be based solely on advertising.)