facebook twitter instagram linkedin google youtube vimeo tumblr yelp rss email podcast phone blog search brokercheck brokercheck Play Pause
Estate Planning Misconceptions - Episode 21 Thumbnail

Estate Planning Misconceptions - Episode 21

In this episode, I discuss estate planning, including why estate planning is important, common misconceptions about estate planning, and how to get started with estate planning.

Listen to Episode 21 Here:


You can listen online through the direct player above, or a much easier way to listen is by subscribing to the podcast through a free podcast app on your phone.  The podcast is available on iTunes, Spotify, Google Play Music, iHeartRadio, and Stitcher, and several others! 


Why is Estate Planning Important?

Have any of you watched Game of Thrones? Well the entire plot, as the name suggests, is based on a power struggle between families for the Iron Throne of the Seven Kingdoms. Throw in a Night King, White Walkers, and some dragons, and you have an exotic tale of what could happen with no agreed upon process for succession in the event of death.

Game of Thrones is an extreme example, but I hope you will get the point.

Here are few high-level reasons why estate planning is important.

  1. You have kids: whether they are minors or adults, different precautions will be needed.
  2. You would like to keep your state or Uncle Sam from getting more than absolutely necessary.
  3. You’re about to get married and have assets you would like to keep separate.
  4. You have a loved one that needs special care.
  5. You’re charitably inclined and want a legacy to forward causes important to you.

Estate Planning Misconceptions

Here are a few estate planning misconceptions and/or excuses I have heard over the years: 

  1. “My kids are going to get more than they had anyway, so I do not want to think about it” (I may have heard this one a time or two within my own family growing up)
  2. Estate planning is only for rich people.
  3. Everything goes to my spouse anyway, so why bother?

Let’s get into that…

1st misconception:

Our kids will just get what is left, more than they had anyway!

This one can lead to big problems. It can lead to infighting, jealousy, and maybe even families no longer being on speaking terms, which is unfortunate. Money has strong emotions tied to it and can cause people to do strange things sometimes.

To help alleviate this, it’s always best to have assets lined up to go where you want.

2nd misconception

“Estate planning is only for rich people.”

Well, first off, being rich is very subjective. If you’re from rural Alabama, your idea of rich is probably different than someone from Manhattan.

The estate tax exemption is currently at $11.58 million per person on the federal level, but many states have lower exemptions. Here in Illinois it’s $4 million, so it’s far lower than the Federal level. If your estate is worth over that amount, you will definitely want to get with an experienced estate planning attorney to ensure you have everything set to limit your tax liability.

3rd misconception

“Everything goes to my spouse anyway, so why bother?” 

This is true in that assets will transfer to your spouse under the unlimited spousal exemption or unlimited marital deduction rules and without tax liability.

The problem comes when the second spouse passes away. The full value of the estate could now be subject to estate taxes at the state and/or federal level if proper planning wasn’t executed.

At this point, the estate tax exemptions only go up to the limits of one person as opposed to having done the planning earlier, with the availability of two full exemptions when both spouses were alive.

Again, in Illinois, if your estate is worth more than $4 million (the state’s estate tax exemption), you will want to consider a trust or trusts. A bypass trust will allow you to stack your exemptions or put up to $4 million in assets in one trust and up to $4 million in assets into another trust to allow a total of $8 million to be exempt from state estate taxes. I am not an estate attorney so you will definitely want to speak with one. I just wanted to give an example of how the process works.

Similarly, at federal level you could use trusts to exempt a bit over $23 million, which is the $11.58 million multiplied by 2.

Those in line to receive some legacy assets will certainly appreciate your diligence with this one!

How to Get Started

A will is a good place to start. According to caring.com nearly 70% of Americans don’t have a will! This number has been going up the past few years, and that is not the direction we’d like to see.

For those with minor children, an important thing to have in your will is where your children will go if something should happen to you and your spouse. You can also put pets in there.

You will also need to include durable power of attorney options that will cover both medical and financial decisions should you become incapacitated while still alive, especially if you are not married. You will obviously want this to be someone you trust.

Other than ensuring things are handled the way you prefer, both medically and financially should something happen to you, it’s important to have these items done so you don’t place an even larger burden on your loved ones in what is sure to be a difficult and emotional time for them under any circumstances!

You don’t create a will for yourself; you do it for your loved ones, and you do it out of love for them to unburden them as much as possible. It can also decrease the chance of rifts or battles that may result from trying times in a family.

Another big proponent of estate planning is privacy. If done properly you should be able to avoid probate. Probate is a legal process in which a will is reviewed to determine whether it is valid and authentic. It is a public, time consuming, and draining process for loved ones. And since it is public, anyone can see your business.

A Living trust may help here. A living trust helps avoid probate and ensures privacy. It can help you determine when and how your assets are disbursed. Also, living trusts are revocable, which means they can be changed. Again, these are just a few examples and definitions. Any actual advice specific for you should be coordinated with an attorney that specializes in estate planning, which I am not.

What you need to determine to get started:

  1. Who gets your assets?
  2. How do you want your assets distributed?
  3. Who do you trust to make decisions for you financially and/or medically if you become incapacitated?
  4. Who will get your minor children or pets?

Estate planning can certainly entail much more, but these are a few important broad strokes.

Now, you can technically use LegalZoom or some other online template-based form to do some of this, but I would always recommend finding a professional, experienced estate attorney you know will get the job done and at a reasonable fee.  

If you don’t have an estate plan, get going. It can always be changed or modified.  

And remember, winter is coming….

SIGN UP FOR WEEKLY EMAIL UPDATES BELOW TO GET NOTIFIED ABOUT NEW PODCAST EPISODES AND RECEIVE UPDATES ON TOPICS RELATED TO MONEY, LIFE AND HOW THEY INTERSECT.