Estate planning is the kind of thing most people put off for another day.
“The most important estate you have, however, is your family and loved ones,” says Rich Dayton, a certified specialist in estate planning, trust, and probate law. “Procrastination is the No. 1 reason people don’t have plans, but it’s how you protect the people you care about the most. That’s the bottom line of what we’re doing when we plan our estate.”
Dayton, the founding member of WealthCounsel LLC and The Dayton Law Firm in San Jose, says there are a lot of misconceptions about what an estate plan is and how to put it together. He cautions people to be wary of internet-based legal advice since states since states have different requirements, deadlines, and options. It’s also important to think beyond the financial assets and consider your greater life goals.
Keys to a great estate plan
In Estate Planning, a 10-week course that dives into the realities of money management, health directives, trusts, wills, contracts, and deeds, Dayton covers many of those options.
The course is a requirement for aspiring financial planners in the UCSC Silicon Valley Extension Personal Financial Planning certificate program, however, it is open and accessible to the general public as well.
Dayton’s list of misconceptions about estate planning
Misconception #1
Only people with lots of money need estate planning to protect their assets.
Not true. In California, anyone with more than $20,000 in real property or more than $100,000 in assets can benefit from an estate plan.
“What matters is what you do with what you have, regardless of how big or small that may be,” Dayton says.
Misconception #2
Tax savings and probate avoidance are the only reasons to do estate planning.
Wrong. Actually, what’s more important is the management of personal purpose and family or social guidance.
“That’s what we call integrated life planning.”
Misconception #3
Estate planning is just for the elderly or people diagnosed with a terminal illness.
Not so. Young and healthy people die every day and they left their loved ones with emotional and financial chaos that could have been avoided or at least tempered had their estate planning been in order.
Misconception #4
All aspects of estate planning can be covered with a simple will.
Big mistake. A will may actually be the least beneficial instrument of all estate planning documents. The time and cost for mandatory probate can be exorbitant.
Misconception #5
Any fill-in-the-blanks, do-it-yourself or otherwise inexpensively acquired living trust will provide all the estate planning that is needed.
Every year, I am hired by surviving heirs to deal with lawsuits generated from the use of cheap living trusts or other inadequate estate planning.
Misconception #6
The use of a living trust gives me less control of my assets.
If you don’t have a trust and then die or become temporarily incapacitated, your assets and affairs will likely be placed under the public control of a judge for the conservatorship or life-probating of your estate.
Misconception #7
Instead of obtaining a quality estate plan, I will invest the money and produce more for my family in the long run.
Not by a long shot. Even if you don’t die in the next 30 years, your investment would have to produce 10 percent interest compounded annually, tax free to equal the financial savings of a good estate plan. If you die in five years or less, the rate of return would have to be 30 percent or greater, compounded annually, tax free, just to break even with the financial savings of a good estate plan.
Misconception #8
Any attorney can draft an estate plan or trust, so I just need to find one who will do it for the cheapest price.
The difference between a custom estate plan from an attorney who specializes in that field and one who does not is similar to the chasm between using a specialist or a general practitioner for brain surgery.
“The distance is even greater if you’re looking for integrated life planning of your whole estate rather than just tax and probate savings.”