4 Estate Planning Myths That Could Be Stopping You From Building Generational Wealth
Written by
Laura Bogart
Edited by
Kristen Mae
Commitment to Our Readers
GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.
20 Years
Helping You Live Richer
Reviewed
by Experts
Trusted by
Millions of Readers
Across personal finance topics, estate planning is probably one of the least understood — while being one of the most anxiety-inducing. Many people don’t realize how important proper estate planning is, not only to protect their loved ones and their assets, but also to build and sustain generational wealth.
Part of the problem is the widespread misconceptions about what estate planning entails and how it can help you. Its role in wealth building and preservation is woefully underdiscussed. That’s something Rachel Balog Donnelly, founder and CEO of AfterLight and author of Late to Your Own Funeral: How to Leave a Legacy and Not a Logjam, wants to change.
Through her work, Donnelly helps people understand the administrative challenges they and their loved ones may face after death while highlighting how proper estate planning can benefit them in terms of building wealth. The first step is recognizing — and correcting — the most common and damaging estate planning myths.
Myth 1: Only Rich People Have Estates
If you think the word “estate” only applies to people with manor houses and megabucks, think again. You don’t have to be a character on “Succession” to have assets that you want to pass down to your loved ones. Donnelly wants everyone to understand that if you own assets or have liabilities, you have an estate — which makes estate planning essential.
“It’s not just about distributing assets but also about managing healthcare directives, guardianship of minors, and digital assets,” she said. “Neglecting to plan can leave loved ones facing uncertainty, complications, and potentially a longer, more drawn-out, and more expensive process.”
To alleviate those burdens and ensure a smooth transfer of assets, you should start by creating a detailed list of all of your assets, including physical, financial and digital. Beyond asset distribution, designate individuals to manage your most precious gems of all — your children or other dependents — if you’re no longer there. Assigning a health proxy to make medical decisions on your behalf is also critical, helping to avoid protracted, costly, and emotionally fraught battles among family members.
Myth 2: Estate Planning Is Simple
Some may think that estate planning is simply a matter of deciding who gets what. This oversimplification leads many to create estate plans that are overly minimal or insufficient. Donnelly warns that what may seem simple to you can become complex for your heirs. Without clear instructions, even a seemingly straightforward estate can cause confusion, delays and unnecessary expenses.
A well-structured estate plan helps your loved ones avoid major financial pitfalls and maximize what they inherit.
“Arrange for immediate access to funds to cover urgent expenses, such as funeral costs, and ongoing financial obligations like mortgage payments and insurance premiums,” Donnelly said. “Make sure to talk this through with your attorney so that you don’t contradict your estate plan, but this can be done through life insurance, a Payable on Death (POD) designation, or other means.”
Myth 3: You Only Need To Do It Once
Too many people see estate planning as a one-and-done task. Once they create a will, they assume their work is finished. Donnelly stresses that estate plans need regular updates to reflect changes in personal circumstances, such as marriages, divorces, births or any other asset changes.
“It’s not just about creating documents but also about developing a strategy that adapts over time,” she said. “Maintain open lines of communication with your family about your estate plan. Hold regular family meetings to discuss and update them on any changes.”
Keeping loved ones in the loop about changes you’ve made can also avoid costly intrafamily squabbles and help them make informed financial plans for their inheritance.
Myth 4: Estate Planning Is Only For Seniors
One of the most pernicious myths about estate planning is that it’s only for older adults. Donnelly strongly disagrees. According to her, anyone 18 or older should have at least a basic estate plan, including a financial power of attorney, healthcare directives and arrangements for digital assets.
“Estate planning is about preparing for the unexpected, ensuring that your affairs are in order, no matter your age,” she said.
More From GOBankingRates
