There are several myths about estate planning that can cause confusion and, if you believe them, can end up causing problems for your family, says an article on Forbes. com. Among them:
1) Estate planning is only for the rich.
While there is a $5.34 million exemption this year on the estate tax, you don’t need a multi-million dollar estate to be helped by an estate plan. Estate planning also deals with making sure that your finances are taken care of if you are incapacitated, that decisions about your health care are carried out according to your wishes, and that your heirs are taken care of when the come comes. Estate planning is for everybody.
2) I’m not old enough for an estate plan.
You never know when you are going to die.
3) I will have to pay a gift tax if I give anybody more than $14,000 per year.
Any gift that tops $14,000 in a given year reduces the total lifetime gift and estate tax exemption by that amount. Only after you exhaust the total lifetime exemption (currently $5.34 million) will you have to start paying.
4) If I die without a will, the state gets my assets.
If you pass away without a will, the state will apply its laws of “intestacy” to determine who gets what. You can go to a site called mystatewill.com to see what would happen in your state. If you don’t like it, get a will made out.
5) Trusts let you avoid estate taxes.
Most trusts do not in and of themselves help you avoid estate taxes. However, certain trusts can be used as part of a strategy to reduce and even avoid tax liability. Check this out with a qualified estate planning attorney.
