Making an estate plan based on the wrong reasons or based on facts that are unreal could be disastrous. An Estate plan should be made from a rational evaluation of the circumstances. This is because; your beliefs go a long way in affecting your decision making. Believing the wrong thing could land your life’s hard labor in the hands of someone who will not properly manage your estate.
After toiling years after years, it is wise to hand your estate over to someone who can uphold your legacy while you are no more. There are some myths which you probably believe and, they might influence your decision in the wrong direction.
- The myth of willing your estate to your children: It is quite normal for you to will your estate to your children. But is this you just keeping to the status quo or you are doing what is best for your estate? It is very much possible that you are acting out of emotion and out of obligation. You are a business man with chains of companies and your child is a Medical Doctor. Now you are planning your will and you decide that it is normal for you to will your chain of companies to your child who has zero or no idea on how to run a business venture. Does your child even have interest in the family business?
If you follow this myth of willing your estate to your child even when he is obviously not the right person for the inheritance, you might end up running down your own business.
- The myth of equality among your heirs: It is a very nice and great idea for you to have the intention of equally sharing your estate among your children. However, this will not be a smart business strategy. In planning your estate, especially when it comes to dicey decisions, you have to be business smart about it. Good and fine it sounds wise to be fair to your children so you divide the family business amongst them whereas, it is only one of them who is actually zealous and interested in taking after you.
- The myth of total dependence on your legal team: Your legal team includes your attorney, financial adviser, etc. It feels nice to know that you have a team of trusted and diligent attorneys and advisers working for you. The unspoken truth is no one will handle your affairs as you would. For you to have a good estate plan, you must closely instruct, monitor and follow up your legal team to make sure nothing goes out of place.
- The myth of tax-mitigation driven estate plan: Many clients get it wrong when they decide to plan their estate with the primary purpose of tax mitigation. This is a misconception that could be very detrimental to the health of your business. Of course it is good to consider the tax factor on your estate during estate planning. But if this be the primary factor for your estate plan, it means you will have a lesser focus on other areas which require considerations as well. Such area include, where you actually want your wealth to go when you pass on. There should be a more tangible reason to plan your estate not just a tax-escape-rout cause it might not turn out to be in your best interest.
- The myth of setting up a trust to take care of everything: Making an estate plan at times end up being the best option compared to leaving things in the hands of a trustee. Things might even get ugly when the trustee is also a member of the family as the beneficiaries. This could create a strain and tension among them. It is wise to appoint a legal figure to work with your trustee. This to some extent will balance things up a bit.
Before planning your estate, get your goals straight. This will help you come up with the best possible plan there is. Shun the myth of equality; match your assets with your children’s capability. Make sure you see beyond the myth of using your estate plan as an escape route for taxes. Make use of trustees only when relevant. Finally, be clear with your directives to your legal team.