Common Estate Planning Misunderstandings (and What Really Matters)
If estate planning feels confusing, you’re not alone. Many people rely on advice they’ve heard in casual conversations, only to find out later that the information wasn’t quite right. These misunderstandings can have serious consequences. Below, we’ll walk through some common estate planning misconceptions and explain what you really need to know.
TL;DR: Key Takeaways
- Estate planning and trusts are not just for the wealthy; they can help almost anyone protect assets, family, and privacy.
- Adult children may not want to keep a family home; planning ahead can prevent conflict and financial strain.
- In Virginia, you generally cannot fully disinherit a spouse without a valid pre‑ or post‑nuptial agreement.
- Powers of Attorney have strict limits on gifting authority in Virginia, especially for Medicaid and long‑term care planning.
- Children with special needs do not need to be disinherited; special needs planning can protect benefits and quality of life.
Table of Contents
- Misunderstanding 1: Only wealthy people need estate planning and Trusts
- Misunderstanding 2: My children will be excited to inherit my house
- Misunderstanding 3: I don’t have to leave any assets to my spouse
- Misunderstanding 4: A Power of Attorney can be used for Medicaid or tax planning
- Misunderstanding 5: Children with special needs must be disinherited
- Get started with an educational workshop
- FAQs about estate planning misconceptions
Misunderstanding 1: Only wealthy people need Estate Planning and Trusts
Truth: Although wealthy people may use Trusts, Trusts can benefit just about anyone.
Trusts come in many shapes and sizes and can be tailored to your needs. What works best depends on the types of things you own – things like homes, types of savings, or other property.
A trust can help people of any income level by:
- Helping manage money and property (assets) while you’re alive, not just after you pass away.
- Making it easier for someone you choose to step in and help if you become ill or unable to manage things yourself.
- Protecting children or other beneficiaries from creditors, scams, or poor financial decisions.
- Helping protect a spouse’s money and property if they need long-term care and Medicaid assistance.
- Improving quality of life for a loved one with a disability by allowing support without risking important benefits.
- Providing for a surviving spouse while still protecting an inheritance for children, which is especially important in blended families.
- Keeping family and financial matters private rather than becoming part of the public court record.
- Allowing things to be handled more quickly after death, without unnecessary delays.
- Reducing the cost and complexity of settling an estate in some situations.
- Making sure a beloved pet is cared for after you’re gone.
If you’re interested in learning more about creating a Trust, check out our blog post: Thankful for Planning: The Many Benefits of a Trust.
For background on how Trusts and estate planning work generally, you may also find these resources helpful:
- American Bar Association – Estate Planning Overview: https://www.americanbar.org/groups/real_property_trust_estate/resources/estate_planning/
- Nolo – Introduction to Living Trusts: https://www.nolo.com/legal-encyclopedia/living-trusts
Misunderstanding 2: My children will be excited to inherit my house.
Truth: Maybe, maybe not.
Unfortunately, adult children are not as sentimental about their childhood home as parents often believe. They will likely be more interested in the house as an asset, instead of a keepsake.
Depending on the language in your Will, the house may “drop like a rock” to your beneficiaries, who will eventually have to use their own money for maintenance, upkeep, taxes, and insurance on the home. If your beneficiary is a minor, things can get even more complicated.
Fortunately, there are many options to make real estate inheritance as stress-free as possible. We’ve outlined several in this other post if you’d like to learn more: What Kinds of Property Interest in our Home can I Leave my Loved One?
You might also want to review neutral guidance, such as:
- Consumer Financial Protection Bureau – Managing someone else’s property: https://www.consumerfinance.gov/consumer-tools/managing-someone-elses-money/
Misunderstanding 3: I don’t have to leave any assets to my spouse.
Truth: You cannot effectively disinherit your spouse without your spouse’s consent.
You can write a Will or Trust that leaves your spouse out. However, under Virginia law, a spouse who is left out can still make inheritance claims. In addition, federal law requires your spouse’s consent if you do not name them as the 100% beneficiary of certain retirement accounts.
The most effective way you and your spouse can agree to disinherit each other is by signing an official pre-nuptial or post-nuptial agreement.
For more detail on spousal elective share and related rules, see:
- Virginia Code – Elective Share (Virginia General Assembly): https://law.lis.virginia.gov/vacode/title64.2/chapter3/
- U.S. Department of Labor – Retirement and ERISA basics: https://www.dol.gov/general/topic/retirement
Misunderstanding 4: A Power of Attorney (POA) can be used to give away someone’s assets in order to qualify for Medicaid or to protect them from taxes and fees.
Truth: In Virginia, this only works in very limited situations, and there’s a yearly limit.
In many states, a POA can allow the person you name (the Agent) to act on your behalf and give away money or property that belongs to you (the Principal). These gifts must stay under a yearly limit – currently $19,000 per person – so they don’t have to be reported to the IRS. However, Virginia law does not allow gifting unless the POA specifically includes gifting authority, and the gifting authority is limited to the annual exclusion amount, unless a court rules otherwise.
The problem is that this yearly limit is almost never enough to protect assets when someone needs long-term care.
For example, if an aging spouse needs nursing home care, Medicaid may help pay for that care. But the couple is still allowed to keep assets for the spouse who remains at home. One of the best ways to do this is for the spouse who needs care to gift them to the healthy spouse. If a POA is used, however, that transfer is limited to the yearly $19,000 amount, which is often far too little to be helpful.
Misunderstanding 5: Children with special needs must be disinherited to protect their benefits.
Truth: Disinheriting a child (or grandchild) with special needs is not necessary to protect their access to needs-based benefits.
With proper planning, you can leave an inheritance to a loved one with special needs in such a way that protects important benefits and improves their quality of life. This kind of planning can provide comfort, enrichment, and support that government benefits alone often cannot.
It’s also not necessary (or wise!) to rely on another beneficiary to “do the right thing” and use part of their inheritance to care for a family member with special needs. Even with the best of intentions, life happens! Divorce, illness, financial trouble, or early death can disrupt those plans and leave the person with a disability without the support you intended.
For an overview of special needs trusts and benefits protection, see:
- Social Security Administration – Supplemental Security Income (SSI): https://www.ssa.gov/ssi/
- Special Needs Alliance – Special Needs Trust Basics: https://www.specialneedsalliance.org/the-voice/special-needs-trusts-an-overview/
Get Started Today With a FREE Educational Workshop
These are just a few of the common estate planning misunderstandings we see, but they definitely aren’t the only ones.
Our on-demand workshop, The 7 Hazards to Your Estate Plan, explores a few more estate-planning myths and helps clarify what really matters when planning for the future. Upon finishing the workshop, you’ll receive a complimentary consultation with an attorney to talk about your unique situation, cover any questions you may have, and get started creating a plan just for you. You can start the workshop by clicking here.
