Myths
Myth 1. “My WILL keeps my family from going through probate when I
die.”
Having a Will does not avoid probate. It almost guarantees a one-way
trip through the probate process! In Pennsylvania, if your estate is
valued over $25,000, it will go through probate. A will has no effect
unless it goes through the probate process. It must be admitted to the
probate court to be enforceable and legal. It must also be validated as
authentic before the transfer of your assets to y our heirs. If
you have a Will, you are telling your family you want them to go through
the probate process!
Myth 2. “My attorney has taken care of everything!”
Once you understand why your attorney has sold you a Will, you will see
why this statement makes an Estate Planner cringe. The daughter of the
pastor at my church just became an attorney. We were talking about Estate
Planning and how Proper Estate Planning can avoid probate. I asked her how
much she knew about trusts. She said that she was interested in learning
more, but she was only taught about Wills and Probate. She was taught
NOTHING about Trusts!
So, when your attorney tells you, you don’t need a trust, this may be
why. Most attorney’s get paid a percentage of your gross estate. From
what I have seen, it averages around 5% plus expenses. So, if your total
(gross) estate is valued at $200,000, the attorney fee is around $10,000
plus expenses that could total 7% - 12% of your gross estate. If your
total estate is worth over $1.5 million, and you are married, a simple
will does not maintain the Unified Tax Credit of $1.5 million of the
deceased spouses estate. In other words, you could have to pay up to an
extra $400,000 - $600,000 in taxes that could have been avoided if a
Proper
Estate Plan were in place.
Myth 3. “My Will has a Trust in it, so my estate won’t go through
probate.”
FALSE - WRONG. All Wills , including Wills with Trusts in them, must go
through the probate process. (If the estate value is over $25,000 in Pa.)
This kind of trust cannot go into effect until after the will has been
probated. The same costs and delays will occur in this situation.
Myth 4. “I have put my children’s names on my accounts so there
will be no probate!”
Maybe, but be careful. Click
Here to read what
happened to Mary. Joint ownership
usually just postpones probate. It can create many kinds of unwanted and
unexpected problems for not only your heirs, but for you while you are
alive! The joint ownership we are talking about, which is the most
popular, is “Joint tenancy with Rights of Survivorship.” This is when
one owner dies, the survivor/s instantly become the sole owner/s. This is
what spouses (husbands and wives) and parents and adult children (parent
and child) use thinking they will avoid probate. In may cases it does
work. Beware, if you have an adult child’s name on your property, and
they die first, you may have to pay inheritance tax to get your share
back! It also opens the property up for a law suit to any party on the
property. If there is one other name besides yours, then you have double
the exposure to a law suit, divorce, etc. If you have two names beside
yours, now you have tripled your exposure!!! Is it worth doing this when
there are other alternatives available to protect your asset from probate.
There are many other reasons to avoid the problems of joint ownership!
Myth 5. “I have an old power of attorney that protects my estate if
anything happens to me, and will keep my estate out or probate!”
FALSE-WRONG A power of attorney is automatically revoked at
incapacitation or death. It will not be of any use if this happens. In
fact this is called LIVING PROBATE and will go to the courts for
management. It is good ONLY while you are of sound mind and alive! In
Pennsylvania, a Durable Power of Attorney can allow your child or other
chosen agent, to handle your affairs if you are incapacitate (can’t
handle your own affairs due to incapacitation) but becomes invalid upon
your death, in which case your will or trust takes over.
Myth 6. “I will just give everything to my children while I am alive.
That will avoid probate!”
Yes it will, but you are losing ALL control of your assets. You could
encounter potential gift tax liabilities. If you are counting on them
holding the assets for your needs while you are alive, the transferred
assets could be lost due to a divorce, law suit, over spending,
bankruptcy, etc. Certain gifts such as real estate lose the stepped up
valuation if inherited through a will or trust, which could cause
potential tax problems down the road for your children. Giving your assets
away does not protect them from Medicaid Spendown for 36 months. Your
beneficiaries will probably have to give back the assets to pay for
nursing home expenses if confined within 36 months of the gift due to
recovery laws.
Myth 7. My estate isn’t large enough to do “Estate Planning.” Most
people don’t know the REAL value of their estates. When I talk to
someone about planning their estate, they are SHOCKED at what their estate
is really worth. I sat at the kitchen table of a couple in their late 70’s.
They told me they didn’t have much, only their mobile home and some
savings. When all said and done, their mobile home, land and savings were
worth approximately $350,000. We increased their income, lowered their
taxable income while lowering their taxes, and put them in a position to
pass about $25,000 to $35,000 more to their heirs. DID ESTATE PLANNING
HELP THIS COUPLE?
Myth 8. My attorney told me I don’t need a trust. As I stated
before, most attorneys have never been taught about the uses, and benefits
of a trust...So, they don’t offer them. Probably as little as 2% - 3% or
attorneys know about trusts and offer them, but less than 2% are fully
versed in estate planning techniques and how to efficiently use trusts and
other estate planning vehicles. Now taking that into consideration, let’s
add a 5% average attorney fee of the Gross Estate, to probate a
will verses the average cost of some simple trust work (such as a
Revocable Living Trust) at between $1,000 and $2,000, you can quickly see
why most attorneys recommend a Will vs. a Trust. We work with attorneys
that understand different trusts and estate planning. They are ready to
assist you and your needs. This eliminates the worry of: “How do I find
the right attorney.”
Myth 9. My broker took care of everything. I hear this one a lot,
unfortunately, I haven’t seen a client that this was the case. Here are
a couple questions to ask yourself about what the broker has done:
Has my broker explained the options I have with my beneficiary
designations?
Has my broker read to me the beneficiary options in my custodial
agreements for my IRA’s, 401 (k)’s or other qualified accounts?
Has my broker had me fill out a simple form to bypass probate with
my accounts?
Has my broker advised me to see an estate planning attorney to
supply me with the documentation I need for a proper estate plan?
Has my broker showed me how to increase my income while reducing or
eliminating my taxes?
Has my broker showed me how to reduce or eliminate the depletion of
my estate from estate taxes and probate fees?
Has my broker explained to me how to benefit my charity without
taking anything from my children?
Has my broker explained anything about asset protection to me?
Has my broker explained anything about Medicaid planning to me?
Has my broker showed my how to benefit from the gains in the market
without putting my principle at risk? Never a loss!
If you lost money in the market, why didn’t you listen to your broker
when he called you several times to tell you to get out? He didn’t call
you? Does he have your best interest at heart?
Maybe it is time to contact Integrity Estate Advisors
for a second opinion!
Call us toll free at 1-888-434-9083 or local at
724-837-3553.
Email us at: info@integrityestateadvisors.com
Is a Doctor a Doctor or would you go to a specialist for a cardiac
problem? The same holds true with your estate planning needs. There are
insurance agents, stock brokers, product pushers, Attorneys, CPA’s,
etc., who may be nice people and really great at what they do, but unless
they specialize in the area of estate planning, you may not have the
tools, documents, and information needed to achieve your desired results.
In most cases we have encountered, the people have either tried to take
the “SELF SERVE” approach or had their generalist attorney, CPA,
Insurance agent, offer their advice.
Because Elvis Presley lived for the day and didn’t plan for
his future . His estate lost 73% to
taxes and legal expenses, leaving only $2.8 million of his $10.2 million
dollar estate to his beneficiaries.
Bing Crosby , on
the other hand, planned and no one knows what his estate was worth and who
got how much. It’s YOUR choice.
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