5 Critical Estate Planning Misconceptions

Have you considered your wishes for after you pass away? While it’s almost assuredly not the most comfortable topic for anyone, planning your estate is crucial. It ensures your assets, investments, and personal belongings pass on to the right people and places, staying protected. However, because it deals with difficult subject matter and often involves complicated legal nuance, estate planning can be one of the more overlooked areas of life and fraught with misconceptions.

In this article, we’ll identify and clear up some of the most common misconceptions surrounding estate planning as a practice, including the notion that it’s only for the wealthy and that you can set it and forget it. Additionally, you’ll hear the diverse perspectives of three experienced industry experts.

1. It’s Only for the Wealthy

When estate planning comes up, people often think of affluent families using trusts to pass on their riches to future generations. To those unfamiliar with its legal meaning, even the word “estate” can evoke visions of massive mansions and valuable investment portfolios fit for the wealthy. Further, you might think of lawyers meeting with clients and drawing up complicated documents in exchange for lofty fees.

However, it’s a fundamental—and according to experts, typical—misconception that your net worth defines your ability to plan for what happens after your death. Estate planning isn’t just for the rich, but for anyone who wants to protect and control the dispersal of their belongings and assets.

“A common misconception is that estate planning is only for the upper class or retirees,” explains Howard Enders, COO of The Estate Registry. “Regardless of your financial situation, estate planning allows people to make sure their wishes are upheld and loved ones are protected.”

Properly putting together an estate plan fits anyone with things to conserve and protect for future generations. This is the case whether you want to protect your home, family heirlooms, and medical wishes or if you’re a high-net-worth individual with complex needs and family dynamics. “Everyone has something to put in their estate plan, whether that be insurance policies or mortgage payments,” Enders says.

2. A Will Is Enough

A will is a foundational piece of estate planning. Among various benefits, it allows you to directly specify what you want to happen to your property upon death and to whom it should go, as well as name an executor to oversee the process. It simplifies the legal undertaking of settling your estate and is a crucial tool in ensuring your wishes are fulfilled.

But just relying on a will can leave holes in your estate plan. “While a will is an essential aspect of an estate plan, it is not the sole document needed,” says Enders. Though important for distributing assets, there are many other components and documents you may need for other purposes, such as protecting your assets or assigning someone to handle decisions if you become incapacitated.

“A well-rounded estate plan should include items such as documentation that designates powers of attorney for financial and healthcare matters, a living will that specifies your medical preferences, and trusts to bypass probate and manage the distribution of your assets,” Enders advises, adding that these documents can “help your loved ones or heirs avoid potential legal challenges and elongated processes.”

Ultimately, the elements that fit into your estate plan will vary depending on your situation and desires. Therefore, it’s wise to meet with an estate planning professional, such as an attorney or financial advisor, who can help you decide what you need and work with you to put them together.

3. You Don’t Need to Plan Until You’re Older

Another misconception is that you must reach a certain age before beginning or even thinking about your estate. It’s not uncommon to believe it only becomes necessary once you enter your older age or are nearing retirement age. However, estate planning isn’t just for the elderly, it’s for people of any age with something to protect, whether you’re 25 or 65.

While you might associate it with the wealthy or older, more established adults, everyone should prepare their estate for the unexpected. Even if you don’t have substantial assets and a serious health crisis or untimely passing seems unlikely, especially at a young age, having the right legal documents in place can prevent future complications.

“Not having an estate plan can make things a lot more difficult for you and for your children/beneficiaries,” emphasizes Joseph Fresard, attorney at Simasko Law in Mount Clements, Michigan. “Even younger people should have documents in place, like power of attorney and wills to nominate guardians for their children in case they pass.”

4. Spouses and Children Automatically Receive Assets

What happens in the absence of an estate plan? If you have a surviving spouse or children, it may seem they would automatically be next in line to receive your property. The reality, however, can be a lot more complicated, making a detailed plan even more important to ensure your loved ones receive what they should.

“Failing to create an estate plan can lead to state laws determining the distribution of your assets, potentially in ways you would not have chosen,” explains Tim Hurban, estate planning attorney and the founder of Hurban Law LLC. Without a will or trust, your estate will go through a drawn-out and complex probate process, where a court will appoint an executor and decide how to disperse your assets. Sometimes, this could mean your spouse or children won’t receive assets in the way you intended.

According to Hurban, lacking a plan “can also cause lengthy legal battles for your heirs, significant financial costs, and added emotional stress during what is already a difficult time for your family.” If you don’t define your requests, your preferences on asset dispersal could be up to interpretation and, unfortunately, could sow discord between relatives on who gets what and why.

Additionally, without an asset protection strategy, creditors or former spouses could also try to make a claim on your estate, reducing what’s left for your heirs. Tools such as irrevocable trusts, prenuptial agreements, and business structures can help shield assets and property and enable you to pass on your property to loved ones properly.

5. You Don’t Need to Update Your Estate Plan

While a key aspect of your holistic financial picture, estate planning can be an involved process. You may need to meet with one or more professionals, iron out details, and sign documents. More than that, however, talking about what happens after your death or incapacitation is not the most pleasant or simple subject, to put it mildly.

For various reasons—such as discomfort and complexity—people may view estate planning as something to get over with and move on, never to review or think about again. However, this can be a critical and all too common mistake. “Unfortunately, it is not uncommon for someone to create an estate plan without revisiting it,” says Enders. “Many Americans leave their families or beneficiaries with outdated and untouched estate plans, burdening their heirs with financial and elongated processes.”

So, how often should you review your estate documents? This can depend on various factors; however, one of the most important is doing so if anything has changed in your life. “It’s not a bad idea to review it every few years to make sure you still want what you put down, but typically updates aren’t needed unless your circumstances change,” says Fresard. “Things like a death or falling out with one of the beneficiaries or trustees will usually mean you should look at updating your documents.”

As Fresard highlights, it’s important to ensure your listed beneficiaries and wishes are up to date with current conditions. Periodically, consider talking to an estate planning professional or financial professional to update components such as your will, trusts, or retirement and brokerage accounts.

Bottom Line: Don’t Overlook Your Estate

Putting together an effective and structurally sound estate is a smart way to protect your property and the rights of your family members. No matter your age or net worth, it’s good to ensure you prepare for the future, even though it’s not the most enjoyable part of planning your financial picture.

“Many people disregard the importance of protecting and properly transferring any accumulated wealth,” often due to it conjuring “uncomfortable feelings since it focuses on topics of death and incapacity” or because “many view it as something costly and too time-consuming,” says Enders. “But without a plan, it can lead to long-term consequences on loved ones, and a comprehensive estate plan establishes that those you care about most will benefit from the financial strategies you’ve set,” he adds.

One of the more daunting parts of estate planning is ensuring you find a trusted and experienced professional with your best interest in mind. If you’re looking to take the plunge, it’s best to search for an expert with either a legal or financial background—or one of each—who can help you devise and consolidate your plans and establish vehicles such as trusts. Common examples of such professionals may include attorneys or those with credentials such as Accredited Estate Planner (AEP) or Certified Financial Planner (CFP).