Ten Estate Planning Myths

1. All my assets will automatically go to my spouse so I don’t need a will.

• Surprisingly, many states’ intestacy distribution structures do not provide that all of a decedent’s (the person who has passed away) property passes to their spouse at death. In fact, in South Carolina and North Carolina, if a decedent has both a surviving spouse and children, the estate is split between the surviving spouse and children.  This distribution structure can be modified only by an estate planning document such as a will or trust.

2. Being appointed Personal Representative gives me legal authority to do everything on behalf of the estate.

• In truth, even after an individual has been appointed personal representative, that person still must seek court approval before taking certain actions on behalf of the estate. If you take certain actions without appropriate authority, you may be personally liable to any party injured as a result of your actions.

3. You do not need an attorney to draft a power of attorney because you can find the statutory form online.

• Some states provide statutory power of attorney forms. However, most states accept powers of attorney that are not identical to their specific statutory forms.  In fact, in certain situations, it may be better to use a format other than the state specific form or to modify or add to the state specific form to accomplish certain things.  For instance, in North Carolina, the attorney-in-fact cannot make gifts to himself/herself unless the power of attorney specifically authorizes this action, and the current North Carolina statutory form uses language that does not necessarily accomplish this objective.  The language of the new statutory power of attorney form, which takes effect on January 1, 2018, is more clear.  Executing a power of attorney without the right language can pose significant problems for both the principal and the family.

4. A power of attorney is effective immediately once signed.

• A power of attorney can be effective immediately upon signing or can be effective only upon a finding of incapacity. It is completely your preference.

5. It’s a good idea to designate co-agents in your power of attorney.

• You can designate a single agent to act alone with a successor agent to act if the primary agent is unable or unwilling to serve. Alternatively, you can designate co-agents to act together.  Families need to remember that designating co-agents can result in family conflict which is exactly what you are trying to avoid by executing a power of attorney in the first place.

6. Probate is private so the details about my estate will remain confidential.

• Probate, my dear friends, is public. In fact, anyone, including your overly-involved colleague, your nosy cousin, and average joe down the street, can go down to probate court and look up your will, discovering not only the value of your assets and but to whom you left those assets.  If the public finds out you had valuable assets that you left to your family members, this sets your loved ones up for will contests and other lawsuits.

7. Adding your child’s name to your bank account is a wise and proactive step to take.

• I’ll say it again.  No.  NO. NO. NO.  Don’t.  When you add a person’s name to your bank account, the result is generally a joint account.  Do you know what happens to the proceeds in a joint account when one account holder dies?  The proceeds go to the other account holder, automatically.  If you intended the proceeds in that account to be divided among your children, adding one child’s name to your bank account will prevent that from happening.  There are alternative and much safer methods of allowing another individual to manage your finances without taking this risky step.

8. I don’t need an estate plan because I am not wealthy.

• An estate plan addresses so much more and so much more important issues than the distribution of wealth and assets. In fact, I’d argue that the most important reason to enact an estate plan has little to do with your wealth and everything to do with preserving family harmony.  An estate plan can minimize family conflict by having hard and dividing decisions already in place when disaster strikes.  An estate plan also allows you to name a guardian for young children, keep your information private, and continue to have control over how your financial and healthcare decisions are made long after you become incapacitated.

9. A will avoids probate.

• A will does not avoid probate. In fact, the law requires that a will be submitted to probate court.  Failure to do so will result in legal consequences.  There are ways to avoid probate, but having a will does not accomplish this.

10. Illegitimate children will inherit from their fathers if they had a parent/child like relationship.

Biological fathers of children born out of wedlock do not have automatic rights to their children.  Likewise, illegitimate children do not automatically receive the benefits of heirship unless certain steps are taken to establish paternity.  If you are either the father of a child born out of wedlock or a child born to a couple out of wedlock, and you are not certain whether the law will recognize the relationship, talk to an attorney.  Otherwise, the child will not have inheritance rights.

DISCLAIMER: Yes, I am an attorney, but I’m not your attorney and your reading of this article does not create an attorney-client relationship between you and me. I am licensed to practice law in North Carolina and South Carolina, and I have based the information in this article on the laws of those two states and the United States. This blog contains general legal information only and should not be taken or relied upon as legal advice. All cases are unique and require a detailed analysis. Additionally, the laws are everchanging which causes certain pieces of article content to become outdated. You should consult with an attorney before you take any action in reliance on this information.