Estate planning is a complex area. This confusion can lead to misconceptions being widely spread as the truth. In this article, we will go over 10 common estate planning misconceptions. This will give you some of the knowledge necessary to properly navigate estate planning.
1. A Will Avoids Probate
The most widespread of the estate planning misconceptions is that if you have a Last Will and Testament your estate will avoid probate. This is incorrect, a Will is a probate document. It acts as instructions for the probate court on how you want your assets to be distributed. This process is lengthy and expensive. Additionally, if you have property in multiple states, you will have to open a proceeding in each of those areas. This just adds to the expense and complexity.
2. Confusing a Last Will and Testament and a Living Will
Though their names are similar, a Last Will and Testament and a Living Will are two very different documents. A Last Will and Testament is instructions to the probate court on the distribution of your assets. Whereas a Living Will is a healthcare document that sets out your wishes regarding care if you become terminally ill or incapacitated.
3. A Will Needs Notarization
In Arizona, a valid Will just needs to be signed by the person creating the Will and two witnesses. These witnesses must be disinterested and over 18. If it has two witnesses the court will accept it, no notary necessary. However, if you only have the Will notarized and not signed by witnesses, the court will reject it and you will have to go through a formal probate proceeding.
4. Estate Planning Documents Must Be Recorded
Another common estate planning misconception is that you must file or record documents, such as Wills and Trusts. This is not the case in Arizona. Wills are only filed with the court when a probate case is opened after you pass. You do not file or record trusts anywhere.
5. Powers of Attorney Can Be Used After Death
Powers of Attorney are only effective when you are alive, but need help caring for your needs. Once you pass, Powers of Attorney are useless. Your heirs cannot use a POA to gain access to bank accounts, have creditors talk with them, or sell your home. Just to name a few. If you did not have a Trust, your heirs would have to file probate to accomplish those things.
6. Joint Ownership is a Good Way to Avoid Probate
Any property that you have titled as Joint Tenants with Rights of Survivorship (JTWROS) will automatically pass to the other joint tenant when you die. However, if you both die at the same time or the surviving joint tenant does not add someone new to the title, your heirs will have to open probate to gain access to the asset. Most of the time JTWROS simply postpones the need for probate, instead of avoiding it altogether.
7. Estate Planning is Just for the Wealthy
It is a common misconception that estate planning is just for the wealthy. In Arizona, if your personal property is over $75,000 or your real property is over $100,000 your heirs will have to open a probate. Most homes in the Phoenix area are over $100,000. Because of this, if you have no type of estate planning documents in place, you are greatly putting yourself at risk for needing probate.
8. You Are Too Young for Estate Planning
Many put off estate planning because of the belief that they are too young to need it. Unfortunately, we are all susceptible to unforeseen occurrences, no matter how old we are. Because of this, it is still important that you take the time to have some sort of documentation in place, especially if you have young children.
9. A Trust Keeps Your Assets Safe from Creditors
A trust will help you to avoid probate, but the assets are still yours and under your control. Because of this, they are still available to creditors. The only way you can protect yourself is by setting up an irrevocable trust. However, you lose all control over the assets you place in it. But you can help to protect your beneficiaries from their creditors by setting up a dynasty trust.
10.You Need an Attorney
If your estate plan is complex and you are looking for legal advice, an attorney will be of great help to you. However, if your plan is simple, an Arizona Certified Legal Document Preparer may be the perfect solution for you. They can provide you valid estate planning documents at a much lower price point. You can learn more here.
These are just a few of the many estate planning misconceptions that are out there. Always be sure to double check what you hear with information from a credible source. Falling prey to one of these misconceptions could end up costing you and your heirs.
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