Estate and trust administration plays an important role in managing and distributing assets after someone passes away. Many individuals approach estate planning with various misconceptions, which can lead to complications.
Understanding the truth about several common myths can clarify how estate and trust administration really works.
Misconception 1: Estate planning is only for the wealthy
A widespread belief is that only people with substantial wealth need estate planning. In reality, estate planning benefits anyone who has assets or specific wishes for their legacy. A will ensures that a person’s property and possessions go to their chosen heirs. For those with minor children, a will can designate guardianship. Trusts can also protect assets, manage them efficiently and minimize probate costs, regardless of the estate’s size.
Misconception 2: A will alone will avoid probate
Many people think that creating a will alone will keep their estate out of probate. However, this is not the case. A will still needs to go through probate, where the court oversees the distribution of assets. Probate can be time-consuming and expensive. Certain strategies, like revocable living trusts or transfer-on-death designations, can minimize probate and facilitate a smoother transfer of assets.
Misconception 3: Trusts are too complex and expensive
Some believe that setting up a trust is complicated and only suitable for the wealthy. While certain trusts involve complex structures, many types of trusts are straightforward and cost-effective. Revocable living trusts offer flexibility and allow changes or revocation during the grantor’s lifetime. Irrevocable trusts have additional asset protection benefits. Trusts can help beneficiaries avoid probate and receive their inheritance directly.
Misconception 4: Executors and trustees have unlimited authority
Some assume that executors and trustees possess unrestricted power. In reality, they have a fiduciary duty to act in the best interests of the estate or trust. The law requires them to follow the specific instructions outlined in the will or trust document. They must maintain transparency, avoid conflicts of interest and seek guidance from legal or financial professionals when needed.
Misconception 5: Taxes will take most of the estate
Many worry that taxes will consume a significant portion of their estate, leaving little for beneficiaries. Indiana does not have an estate tax, and most estates fall below the federal estate tax exemption limit, currently over $12 million per person. Working with an attorney can help you minimize estate taxes.
Understanding these misconceptions helps people approach estate and trust administration with clarity and confidence, ensuring a secure and intentional legacy for future generations.