5 Estate Plan Myths Debunked
There are many myths and misconceptions about Estate Plans. I have complied a list of the 5 most common myths about estate planning.
1. “I don’t have an estate, so I don’t need an estate plan.”
This claim cannot be further from the truth! An estate plan is important regardless the size of the estate. An estate plan contains important medical and financial documents. There are at least six essential documents every person over the age of 18 should have in place. 1) Durable Power of Attorney; 2) Medical Power of Attorney; 3) HIPAA Release 4) Declaration of Guardian; 5) Directive to Physicians; 6) Last Will and Testament.
Durable Power of Attorney – This document allows you to name an individual to make financial decisions in the event you are unable to make those decisions. It allows you to designate someone to pay your bills and manage your accounts so you are not behind when you regain abilities. Furthermore, in the event you are incapacitated, a durable power of attorney will allow your family to avoid the costly and time-consuming experience of Guardianship.
Medical Power of Attorney – The medical power of attorney is similar to the durable power of attorney, except instead of designating an individual to make financial decisions, you designate an agent to make medical decisions.
HIPAA Release (Health Insurance Portability and Accountability Act) - The HIPAA release is a document where you designate people you want to have access to your medical information. Doctors are legally limited in the amount of information they can share regarding your health care information and this documents enables the doctors to speak freely with the people you designate.
Directive to Physicians- This document is often referred to as the “Living Will”. Sometimes people confuse the “Living Will” with the Last Will and Testament. These are two completely different documents.
The Directive to Physicians, or “Living Will” is where you designate your desires of care in the circumstance that you are in a terminal or irreversible condition. Although this decision can be difficult, a Directive to Physicians allows you to stay in the driver’s seat of your health. Furthermore, it reduces your families stress because your wishes are known.
Declaration of Guardian – I describe this document as our back up to the Durable and Medical Powers of Attorney. In the event that you must have a Guardian named this document permits you to designate who you want to be your guardian. Having this simple document can save families thousands of dollars in lengthy litigation.
Last Will and Testament - The Last Will and Testament is a document where you designate how you would like to pass your property, as well as, where you name the guardian for your children in the event you pass away with minor children. This document ensures that your desires and intentions are followed and avoids a more costly intestate process.
In fact, it is people with smaller estates that hurt the most when no plan is in place. When you find yourself dealing with an unexpected incapacity or death the legal fees to have someone appointed to make financial decisions and medical decisions tend to cost exponentially more than it does to put together an estate plan with an attorney. These expenses can really take a toll on smaller estates. Often, just by having the documents contained in an estate plan, a family can save the money and headache of dealing with the courts.
2. “I already have a Living Will, I don’t need another Will.”
This statement makes me cringe. A Living Will and a Will (or Last Will and Testament) are two completely different documents. The technical term for a Living will is “Directive to Physicians”. I prefer to use this statutory term, “Directive to Physicians” rather than the term “Living Will”, because I believe the term “Living Will” is confusing.
- The Directive to Physicians is the document were you decide whether you would like all life sustaining treatment or you choose to be let go gently in the event you are in a terminal or irreversible condition. This is an important piece of an estate plan, but it is just one piece and it is NOT a Will or a Last Will and Testament.
- The Last Will and Testament is the document were you designate who will care for your children, who you would like to handle your estate, and who you would like to inherit as beneficiaries when you pass away.
3. “I have a Will so I can avoid probate.”
False! Probate is the proceeding where we prove the Will is actually the Last Will and Testament of the Deceased, that it meets all of the legal requirements, and the court appoints the Executor to act on the behalf of your estate. In your Will you typically have the opportunity to name who you would wish to serve as Executor. The person does not become the Executor until they are appointed and take an oath with the court. The person you name as Executor in your Will cannot act on the behalf of your estate until the Will is probated.
Fortunately, the probate process is a relatively straightforward in Texas. Having a Will allows families to avoid the extra cost that often occur in the intestate process, which is the process most families must go though when there is no will.
4. “I don’t need a Will because everything will just go to my spouse.”
Not necessarily. It is never safe to assume your estate will “automatically” pass to your spouse. There are so many factors that can affect who property passes to. I have seen countless situations were spouses mistakenly thought their house or other property was going to go to their surviving spouse but they end up having to share the asset or it went to to someone else instead. It is important to sit down with an attorney and account for each of your assets to make sure they pass to the people you want.
5. “After I get a Will there is no need to have it redone.”
Unfortunately this is not true. You should review your estate plan annually and with an attorney at least every five years. You should review it annually to make sure it is what you still desire. Life is constantly changing and depending on the events that have occurred in your family, such as, death, adoption, birth of a new child, or increase or decrease in the size of your estate your estate plan will too.