People sometimes pass along “information” about estate planning that is untrue or incomplete, and this can lead to mistakes that yield negative consequences. In this post, we will look at a handful of estate planning myths that can lead you astray.
DIY estate planning is a simple solution.
You can buy generic, fill-in-the-blanks legal documents online, and these companies sell will and trust templates. They contend that anyone can plan their own estate using these products.
There are a number of reasons why you should take pause before you try to go it alone. One of them is the fact that there are state specific rules that must be followed, and there is a lot at stake.
Plus, are you sure that you know what estate planning documents you should use? A will is not always the right choice, and there are a number of different types of trusts that can be utilized to satisfy specific objectives.
Your final act of giving is a very big deal, and it is a legal matter. There is no reason to take risks with DIY estate planning notions when qualified legal help is just a phone call away.
You pay no taxes on inheritances.
This is one of those myths that springs from a seed of truth. If you receive a direct bequest or life insurance proceeds, you would not have to report the inheritance as taxable income when you file regular income taxes.
Inherited assets that appreciated during the life of the person that left the inheritance get a step-up in basis. The beneficiary would not be required to pay capital gains taxes on the gains that accumulated during the life of the decedent.
There is definitely some good news with regard to taxes on inheritances, but there is also bad news for financially successful people. We have a federal estate tax in the United States, and in Connecticut, there is a state-level estate tax.
The exclusion is the amount that can be transferred before the estate tax would be imposed on the remainder. On the federal level, the exclusion is $11.7 million this year, and it is going down to $5.49 million at the end of 2025.
On the state level, the exclusion is $7.1 million in 2021. If you own valuable property in a state outside Connecticut that has its own estate tax, that tax would apply to your estate if its value exceeds the exclusion.
Massachusetts has an estate tax, and their exclusion is just $1 million, so you should gain an understanding of the tax laws in states where you own property.
Estate planning is not necessary until you are a senior citizen.
Every responsible adult should have an estate plan in place, and it becomes particularly important when other people are depending on you. When you get married, you and your spouse should devise a plan, and the need for planning is amplified if you have children.
You never know what the future holds, and you should make sure that your loved ones will be provided for under any circumstances. When it comes to income replacement, life insurance is the ideal solution, and term life is affordable for younger adults.
Medicare will cover all of your health care expenses.
If you pay into the program sufficiently while you are working, you will qualify for Medicare when you are 65 years of age under currently existing laws.
It will provide a health insurance underpinning, but there are premiums, deductibles, and coinsurance payments that come out of your own pocket.
Plus, there is a huge expense that is not covered at all. Medicare does not pay for living assistance, and the majority of seniors will need some type of paid long-term care eventually.
About 35 percent of elders will live in nursing homes, and the median annual cost for a private room in a nursing home in Connecticut was $167,900 last year.
Medicaid will cover long-term care, and it is possible to gain eligibility even if you have resources if you take the right steps in advance.
Schedule a Consultation Today!
We are here to help if you are ready to work with an attorney to put a plan in place. You can schedule a consultation at our estate planning offices in Glastonbury or Westport, CT if you call us at 860-548-1000.
There is also a contact form on this site you can use to send us a message, and if you reach out electronically, you will receive a prompt response.
- What Does a Living Trust Trustee Do? - June 9, 2022
- Estate Planning: Do You Need More Than a Will? - May 24, 2022
- What Are the Responsibilities of the Probate Court? - May 10, 2022