We hear a lot of misinformation while assisting families with estate planning and probate proceedings. Unfortunately, it is often the case that important decisions are made based on this misinformation. Below are just a few of the many estate planning myths we hear on a regular basis:
Myth #1: A Large portion of my estate will go to the government in the form of Estate Taxes
This statement is true for a very small percentage of Americans. The reality, under current tax law, is that only those who die with a net worth in excess of $5 million ($10 million for a married couple) will owe Federal Estate Tax upon death. As very few people in today’s world are worth $5 million, very few people should go out of their way to structure their estate plan to avoid this tax.
Myth #2: I have a Will so my estate will avoid probate
This statement is blatantly untrue. All property titled in the name of a deceased individual will have to be probated. A Will does not avoid probate. A Will merely directs your Personal Representative (the person many call an “Executor”) in dealing with your property in probate. There are methods to eliminate the need for probate but a Will, by itself, does not accomplish this goal.
Myth #3: If I am incapacitated my spouse can make end of life decisions for me
A good Estate Plan should address more than just post-death matters. Many people will find themselves in situations, whether temporary or permanent, which render them incapable of making financial or medical decisions for themselves. These situations can be addressed through various Estate Planning tools. One such tool is called a Patient Advocate Designation, sometimes called a Medical Power of Attorney.
In Michigan, a traditional Medical Directive, giving health care professionals specific instructions on how they should act under certain circumstances, has no legal effect. What we have, in lieu of these directives, is the Patient Advocate Designation. This document allows you to name a loved one or friend who is authorized to make medical decisions on your behalf if you are incapable of making those decisions for yourself. Contrary to common belief, a married person’s spouse is not automatically authorized to make these decisions. Without a Patient Advocate Designation, specifically authorizing the spouse to make these decisions, a guardian must be appointed by a judge. This guardian will likely be the spouse of a married person but the spouse, unless named in a Patient Advocate Designation, has no authority until a judge gives him or her that authority.
There are certainly many other myths surrounding the estate planning and probate process. These are only a few select pieces of false information we encounter on a regular basis. Other myths will be addressed in future articles.